When should I use "para" versus "por"?
para = for, to. por = by, in behalf of.
But aren't the words "pelo" and "pela" basically a contraction of "por" and "o" or "a", resulting in something that means "for the"? Wouldn't that suggest that "por" also means "for"?
yes, that's why one can't be too strict in this area. preposition is a thing you can't translate literally everytime but by the context ;)
why doesn't POR ELE become PELO here?
Some contractions are nor possible
pelo = por + o
From the mouth of my fiance:
Nos pagamos por ele!
She is Portuguese from Portugal. Perhaps it is a Brazilian thing?