Please read the help on trust in Mercurial and make sure that you’ve added the trust settings on the server. When you connect over SSH, it does not matter who you trust or don’t trust locally — it’s the hg binary that you run on the server (via the SSH tunnel) that needs to trust the config file.
Also note that you need to put
[trusted]
users = root
in the /etc/mercurial/hgrc file on the server. The section.key = name syntax we use when talking about configuration settings only work on the command line.