Yes, with 3 way switches, both need to function to complete the circuit. If your dimmer is as old as the mercury switch, this sounds like a great chance to replace both of them.

Thanks loads for the info. Replaced dimmer switch. Hanging kitchen light now working! (from both switches).

Dimmers are especially sensitive to the current surges that can accompany a 'blowing' light bulb.

The most common dimmer size is 600 watts, or 5 amps at 120 volts.

Exceeding this number for even a fraction of a 60 Hz cycle can destroy the semiconductor (a Triac) in the dimmer.