So I tried what you suggested, edited pip,py, removed and installed paramiko, and still got same error re: multi-back ends.
So I was a bit cobfused. When I install paramiko I noticed it uses cryptography package not pycrypto. I did in fact try manually installing pycrypto previously and got a setup error, which your pip patch does indeed fix.
But a brief googling revealed that pycrypto is for paramiko 1.x & what the plain install is doing is installing paramiko 2.0. So I asked myself is that the problem? Indeed it was. Installing version 1.17 of paramiko made everything work perfectly, and I didn't even need your patch to manually install pycrypto, since the bundled version works fine.
Anyway, thanks so much for your help and for putting me on right path to solve the problem, even inadvertently.
Hopefully future versions support paramiko 2.0 since I understand cryptography is a more secure library :)