Python 3 - on converting from ints to 'bytes' and then concatenating them (for serial transmission)

You are confusing Python byte literal syntax here; you do not need to generate the literal syntax, just the byte value; the bytes() type accepts a sequence of integers too:

>>> bytes([255])
b'\xff'

Applied to your code:

SET_BG_COLOR = b'\xAA\x03\x03'
for r in range(0,255):
    red = bytes([r])
    blue = bytes([255 - r])
    ser.write(SET_BG_COLOR + blue + b'\x00' + red + b'\xC3') #BGR format

or, simpler still:

SET_BG_COLOR = [0xAA, 0x03, 0x03]
for r in range(0,255):
    ser.write(bytes(SET_BG_COLOR + [r, 0x00, 255 - r, 0xC3])) #BGR format

using literal hex integer notation.

Demo for r = 10:

>>> SET_BG_COLOR = [0xAA, 0x03, 0x03]
>>> r = 10
>>> bytes(SET_BG_COLOR + [r, 0x00, 255 - r, 0xC3])
b'\xaa\x03\x03\n\x00\xf5\xc3'

The hex() function outputs 4 characters per byte; starting with a literal 0x followed by the hex representation of the integer number. Encoded to UTF8 that's still 4 bytes, b'\x30\x78\x30\x31' for the integer value 10, for example, versus b'\x10' for the actual byte you wanted.