Not working how? Backspace is handled not by NGUI but by your device. Your device simply feeds the final string to NGUI. It has always been like that.
TouchScreenkeyboard.hideInput is not used anywhere in NGUI -- at least in 3.0.
Well yes... by not using TouchScreenkeyboard.hideInput as you've mentioned :P
He doesn't like seeing what he's typing? That doesn't strike you as strange at all?
All I can suggest is investigate it. Check what Unity feeds NGUI via the keyboard class as that's what NGUI ultimately depends on.