Long story long... I have two repos: local and remote. Local is binded to a remote one. My username is muszek (on both machines). Remote files originally belonged to user tomekg, but following james_w's advice, I did the following (substitute "newgroup" for "hotel"):
<james_w> muszek_: groupadd "newgroup"
<james_w> adduser muszek newgroup
<james_w> adduser tomekg newgroup
<james_w> chown tomekg:newgroup -R branch
<james_w> chmod g+w -R .bzr
added by me: chmod -R g+w *
<james_w> find .bzr -type d -exec chmod g+s '{}' \;
... so everything belongs to tomekg:hotels (and so are muszek and tomekg).
I added/modified/deleted some files locally and did a bzr commit. It went fine.
I logged on the remote machine and did bzr update. Tried several time, deleted webroot/css/reset-fonts-grids.css somewhere between those operations visible in logs (so that the error is slightly different).
I spent ~2 hours with bueno and james_w - we tried many things, nothing has helped.
Output of bzr update -Derror will be attached to the second post...
Finally I did su tomekg later on and the update went fine.
All in one sentence: I have proper permissions. I can successfully operate on files and dirs manually. But when I run bzr update, it refuses to delete them (permission denied).
note: webroot/