Actually turns out that the work around isn't reliable - I still get that error occasionally (I'm using SSH)

In T9450#163090, @WTreutterer wrote:

The same problem occurred on my site with the latest Phabricator and the latest Mercurial 3.7.2 installed on both sides.

Interestingly, it can be cured setting a special development debug flag for in the Mercurial configuration file:
in /etc/mercurial/hgrc or in vcs-user's ${HOME}/.hgrc adding the following snippet

[devel]
bundle2.debug = true

caused a hg push to a hosted Phabricator repository to work without a problem. But do not ask me, why.

It's very difficult to dive into the current state of play in a long lived diff as the code is split into pieces between each comment.