when raising an overpair isn't correct?

[pointcount]

I posted this within someone elses thread about 88 but I thought it warrants a new thread and am interested to know if I'm just speaking garbage here or there is some merit in this theory.

Party Poker 1/2 Hold'em (9 handed)

Preflop: Hero is MP1 with 8[img]/images/graemlins/spade.gif[/img], 8[img]/images/graemlins/heart.gif[/img].
<font color="666666">2 folds</font>, Hero calls, <font color="666666">1 fold</font>, MP3 calls, <font color="666666">1 fold</font>, Button calls, SB completes, BB checks.

Flop: (5 SB) 2[img]/images/graemlins/spade.gif[/img], 6[img]/images/graemlins/diamond.gif[/img], 7[img]/images/graemlins/diamond.gif[/img] <font color="blue">(5 players)</font>
<font color="CC3333">SB bets</font>, BB calls, <font color="CC3333">Hero raises</font>, MP3 calls, Button calls, SB calls, BB calls.

Turn: (7.50 BB) 2[img]/images/graemlins/diamond.gif[/img] <font color="blue">(5 players)</font>
SB checks, BB checks, <font color="CC3333">Hero bets</font>, MP3 folds, Button calls, SB calls, BB folds.

River: (10.50 BB) 9[img]/images/graemlins/spade.gif[/img] <font color="blue">(3 players)</font>
SB checks, <font color="CC3333">Hero bets</font>, Button calls, SB folds.

Final Pot: 12.50 BB

Correct me if I'm wrong but this is a situation where sometimes raising the flop is not the correct option, you dont have sufficient pot equity to warrant it with this many callers. If the turn card is a rag card then your pot equity goes up quite considerably. This turn card is horrible and you're best to check/fold here.

If the turn was not a threatening card, your pot equity will increase and you have better admission to raise to try and protect your hand.

Does anyone disagree with this theory with hero's holdings and this flop?