I don't think the fact that \ is the line continuation character should be problem. It's only a line continuation character outside of a string. (After all, it's also the line continuation character in C!)
I think the bigger issue is that using it as an escape character will break existing scripts that use it in paths. For example:
Code:
AVISource("C:\bar\foo.avi") # \b shouldn't be a backspace
frequentPath = "C:\bar\" # we don't want the quote to be escaped
Import(frequentPath + "baz.avs")