diff --git a/CHANGES b/CHANGES
--- a/CHANGES
+++ b/CHANGES
@@ -1,3 +1,16 @@
+Version 0.6.0.1 released 20 Mar 2013
+
+* runProcess now allows access to the current environment, instead of
+  running in a bare environment.  This fixes problems for those who have
+  git in a nonstandard path. (Jochen Keil)
+
+* Allow latest Diff.
+
+* Reconfigured cabal file to use new Cabal test framework.  Run tests with
+  `cabal configure --enable-tests && cabal build &&  cabal test`.
+
+* Set environment variable HGENCODING for mercurial.  Closes #6.
+
 Version 0.6 released 31 Dec 2012
 
 * Updated to use Diff 0.2.  This involves an API change:
diff --git a/Data/FileStore/MercurialCommandServer.hs b/Data/FileStore/MercurialCommandServer.hs
--- a/Data/FileStore/MercurialCommandServer.hs
+++ b/Data/FileStore/MercurialCommandServer.hs
@@ -61,7 +61,8 @@
 -- | Run a mercurial command directly without using the server.
 rawRunMercurialCommand :: FilePath -> String -> [String] -> IO (ExitCode, String, BL.ByteString)
 rawRunMercurialCommand repo command args = do
-   (status, err, out) <- runShellCommand repo Nothing "hg" (command : args)
+   let env = [("HGENCODING","utf8")]
+   (status, err, out) <- runShellCommand repo (Just env) "hg" (command : args)
    return (status, LUTF8.toString err, out)
 
 -- | Create a new command server for the given repository
diff --git a/Data/FileStore/Utils.hs b/Data/FileStore/Utils.hs
--- a/Data/FileStore/Utils.hs
+++ b/Data/FileStore/Utils.hs
@@ -27,7 +27,8 @@
         , encodeArg ) where
 
 import Control.Exception (throwIO)
-import Control.Monad (liftM, when, unless)
+import Control.Applicative ((<$>))
+import Control.Monad (liftM, liftM2, when, unless)
 import Data.ByteString.Lazy.UTF8 (toString)
 import Data.Char (isSpace)
 import Data.List (intersect, nub, isPrefixOf, isInfixOf)
@@ -39,6 +40,7 @@
 import System.IO (openTempFile, hClose)
 import System.IO.Error (isDoesNotExistError)
 import System.Process (runProcess, waitForProcess)
+import System.Environment (getEnvironment)
 import qualified Data.ByteString.Lazy as B
 import qualified Data.ByteString as S
 import qualified Control.Exception as E
@@ -68,7 +70,8 @@
   tempPath <- E.catch getTemporaryDirectory (\(_ :: E.SomeException) -> return ".")
   (outputPath, hOut) <- openTempFile tempPath "out"
   (errorPath, hErr) <- openTempFile tempPath "err"
-  hProcess <- runProcess (encodeArg command) (map encodeArg optionList) (Just workingDir) environment Nothing (Just hOut) (Just hErr)
+  env <- liftM2 (++) environment . Just <$> getEnvironment
+  hProcess <- runProcess (encodeArg command) (map encodeArg optionList) (Just workingDir) env Nothing (Just hOut) (Just hErr)
   status <- waitForProcess hProcess
   errorOutput <- S.readFile errorPath
   output <- S.readFile outputPath
diff --git a/Setup.lhs b/Setup.lhs
--- a/Setup.lhs
+++ b/Setup.lhs
@@ -1,11 +1,3 @@
 #!/usr/bin/env runhaskell
 > import Distribution.Simple
-> import System.Process
-> import System.Exit
-
-> main = defaultMainWithHooks $ simpleUserHooks { runTests  = runTestSuite }
-
-Run test suite.
-
-> runTestSuite _ _ _ _ = runCommand "./dist/build/test-filestore/test-filestore" >>= waitForProcess >>= exitWith
-
+> main = defaultMain
diff --git a/filestore.cabal b/filestore.cabal
--- a/filestore.cabal
+++ b/filestore.cabal
@@ -1,6 +1,6 @@
 Name:                filestore
-Version:             0.6
-Cabal-version:       >= 1.8
+Version:             0.6.0.1
+Cabal-Version:       >= 1.10
 Build-type:          Custom
 Synopsis:            Interface for versioning file stores.
 Description:         The filestore library provides an abstract interface for a versioning
@@ -21,10 +21,6 @@
   type:          git
   location:      git://github.com/jgm/filestore.git
 
-Flag tests
-    default:    False
-    description: Build test suite
-
 Flag maxcount
     default:     True
     description: Make use of a recent (>= 2.3.0) Darcs feature which vastly improves the performance
@@ -43,7 +39,7 @@
                          time >= 1.1 && < 1.5,
                          xml >= 1.3 && < 1.4,
                          split >= 0.1 && < 0.3,
-                         Diff >= 0.2 && < 0.3,
+                         Diff >= 0.2 && < 0.4,
                          old-locale >= 1.0 && < 1.1
 
     Exposed-modules:     Data.FileStore, Data.FileStore.Types, Data.FileStore.Git, Data.FileStore.Darcs, Data.FileStore.Mercurial,
@@ -52,29 +48,26 @@
     Other-modules:       Paths_filestore,
                          Data.FileStore.DarcsXml,
                          Data.FileStore.MercurialCommandServer
-    extensions:          FlexibleInstances, CPP
-
+    Default-Extensions:  FlexibleInstances, CPP
+    Default-Language:    Haskell98
     if flag(maxcount) 
         cpp-options: -DUSE_MAXCOUNT
-        extensions: CPP
     if impl(ghc >= 6.12)
       Ghc-Options:       -Wall -fno-warn-unused-do-bind
     else
       Ghc-Options:       -Wall
     Ghc-Prof-Options:    -auto-all
 
-Executable test-filestore
-    if flag(tests)
-       Buildable:   True
-    else
-       Buildable:   False
+Test-suite test-filestore
+    Type:           exitcode-stdio-1.0
     Hs-source-dirs: tests
     Main-is:        Tests.lhs
+    Default-Language:  Haskell98
     Build-depends:  base >= 4 && < 5,
                     HUnit >= 1.2 && < 1.3,
                     mtl,
                     time,
-                    Diff,
+                    Diff >= 0.2 && < 0.4,
                     filepath >= 1.1 && < 1.4,
                     directory >= 1.1 && < 1.3,
                     filestore
diff --git a/tests/Tests.lhs b/tests/Tests.lhs
--- a/tests/Tests.lhs
+++ b/tests/Tests.lhs
@@ -344,8 +344,8 @@
     Diff from Nothing should be diff from empty document.
 
 >   diff'' <- diff fs diffTitle Nothing (Just $ revId firstrev)
->   let added'' = [s | Second s <- diff']
->   assertEqual "added lines from empty document to first revision" [lines testContents] added''
+>   let added'' = concat [x | Second x <- diff'']
+>   assertEqual "added lines from empty document to first revision" (lines testContents) added''
 
     Diff to Nothing should be diff to latest.