[nightlyraver]

In a purely textualist sense, I believe the hand is dead. I'm no expert, but I think the rule is that exposing your hand before acting will dead your hand. Clearly, saying "let's do it" is not "acting" on your hand. That said, SB put chips in after the exposure so those chips are not included in the pot (i.e. BB wins only the preflop pot plus his bet).

On the other hand, the purpose of the rule, IMHO, is to prevent card exposures from ruining multi-way action or to prevent collusion. This is not the case here. In HU action, no 3rd party can be harmed. Therefore, card exposures ought not dead a hand, SB will still be live, and he acted on his hand by moving in.

I have a feeling the first approach is more commonly used...