Ok I think I figured this out.

Bern can you try removing config.ini from the jinja2 template directory 
and ry to reproduce the problem.

I think the is that we supply a config.ini as part of the template. It 
gets copied into the tracker directory. Because it exists it stops the install command from creating a config.ini that matches the cnfig 
settings.

If you delete config.ini from the templates, the install command will 
create a config.ini with the correct setting for backend.

If this works, I suggest one of two paths:

 1) delete config.ini from the template
 2) force the install command to always overwrite the config.ini even
    if one exists.

I am partial to option 1 so we don't have to try to keep the template 
config.ini file in sync at all. Thoughts?