I've tried to reproduce this on my machine and at the step you mentioned Notepad is correctly launched so that a new commit message can be entered. When I entered a new commit message in Notepad, saved the file, and closed Notepad, the commit in SQL Source Control finished successfully.
Can I just double-check with you that Notepad definitely isn't launched? On my machine it was set to be the active window, but can you please carefully check to see if it was launched, but because it wasn't made the active window you didn't notice it.
It is mercurial itself that is launching Notepad (SQL Source Control just asks mercurial to do the commit, and it decides to launch Notepad), so is there any chance you could have configured mercurial not to launch Notepad? This setting could be in the hg command line or in TortoiseHg.