BIT freezes entire system GUI

Sounds like there is a problem with gnome-keyring. Please disable the use of keyring with following command and try again:

sed -e "s/.password.save=true/.password.save=false/g" \
        -e "s/.password.use_cache=true/.password.use_cache=false/g" \
        -i ~/.config/backintime/config

If this fixed the problem you should try to reinstall python2-keyring and python2-secretstorage

I did that, and this time I got a GUI box asking for SSH password, which I gave. Then another GUI box appeared asking for Encryption password. I typed it in, hit OK, and the entire system GUI froze.

I had to switch to another tty to reboot the system from command line.

Hmm. Please run 'backintime-gnome 2>&1 >~/backintime.log' and post backintime.log

Also please rename ~/.config/backintime/config and create a new profile with local snapshots so we can see if this is related to ssh/encfs or if it is a general problem.

Oh, I forgot to mention that you should run 'backintime-gnome 2>&1 >~/backintime.log' after reboot so we could see the output during freeze

The problem does not happen for local snapshots, whether they are encrypted or not.

Running backintime-gnome 2>&1 >~/backintime.log is pointless because then the system will not freeze cause it will ask me inside terminal for
"Enter passphrase for key '/home/juha/.ssh/id_dsa': "

The whole point is that it crashes when it is NOT run from terminal. If I run the same command from runbox (like Synapse), then the system crashes as usual but the backintime.log remains empty.

Okay, sorry. I didn't recognize that.

Please change the last line in /usr/bin/backintime-gnome to:

ssh-agent python ${APP_PATH}/app.py "$@" 2>&1 >~/backintime.log

And sorry for the late answer. I'm quite busy these days.

The ~/backintime.log file is being created, but remains empty.

Also, GUI does not freeze if the remote SSH host is offline and BIT can't connect to it.

Without any log this is just shooting into blue. Lets try to deactivate some steps on the mountprocess and see if it makes BIT to stop freezing.

Please add a line 'return True' after 'def pre_mount_check(self, first_run = False):' in /usr/share/backintime/common/sshtools.py
It it's still freezing add 'return' after 'def _mount(self):' and try again

If one of these helped please add some (not very professional) debug symbols into the function that failed. Something like
with open('/home/USER/bit.log', 'w') as f:
     f.write('check_ping_host run successfully, trying next')