I made a backdoor Roth contribution for 2017 but I realized that I want the money to pay off another asset. I think that a Roth conversion is subject to a new 5 year rule period before a distribution would be considered qualified.
The distribution isn't "qualified" unless you meet the
qualifications: be 59½, disabled, or dead and also have the account be open for five years. Length of time after a conversion is immaterial here.
What happens if it's not a "qualified distribution"? This is where the
ordering rules come into play. If you ever made any direct, non-backdoor contributions to a Roth IRA, these come out first. Next is any conversions from traditional, oldest first. Finally is earnings that happened after the money was in your Roth IRA.
The original contribution of $5,500 was in cash and only earned about $1 interest since I made the contribution. So if I take a distribution, would I pay tax and 10% penalty on the $1 of interest I earned? (I think I can handle that). Or can I still just take out my contribution amount and pay no tax?
If the only money you have in a Roth IRA came from a $5,500 backdoor conversion that you performed recently, and the account has since grown to $5,501, the first $5,500 would be a return of the post-tax conversion principal. This is not taxed. If you took out the last dollar, it would count as regular income taxed at your regular tax bracket, plus a 10% early withdrawal tax.
