That one bad hand...

[bdohaney]

I have been weighing over the hand that knocked me out of the MTT last night, and have thought it over repeatedly. here is the hand.

PokerStars Game #2505271053: Tournament #12088558, Hold'em No Limit - Level XVI (4000/8000) - 2005/09/05 - 16:07:22 (ET)
Table '12088558 20' Seat #8 is the button
Seat 3: ThomasToget (159358 in chips)
Seat 4: sylvyu (136204 in chips)
Seat 5: UnBalanced1 (75032 in chips)
Seat 6: Almost_Phil (86582 in chips)
Seat 8: bdohaney (135954 in chips)
Seat 9: tdubes (22891 in chips)
ThomasToget: posts the ante 400
sylvyu: posts the ante 400
UnBalanced1: posts the ante 400
Almost_Phil: posts the ante 400
bdohaney: posts the ante 400
tdubes: posts the ante 400
tdubes: posts small blind 4000
ThomasToget: posts big blind 8000
*** HOLE CARDS ***
sylvyu: folds
UnBalanced1: folds
Almost_Phil: folds
bdohaney: raises 32000 to 40000
tdubes: calls 18491 and is all-in
ThomasToget: raises 118958 to 158958 and is all-in
bdohaney: calls 95554 and is all-in
*** FLOP *** [3d 6h 4s]
*** TURN *** [3d 6h 4s] [8h]
bdohaney said, "there goes"
*** RIVER *** [3d 6h 4s 8h] [Ad]
*** SHOW DOWN ***
ThomasToget: shows [Qs Qd] (a pair of Queens)
bdohaney: shows [Kh Qh] (high card Ace)
ThomasToget collected 226126 from side pot
tdubes: shows [Kc Kd] (a pair of Kings)
tdubes collected 69873 from main pot
bdohaney said, "gg"
bdohaney said, "oh well."
*** SUMMARY ***
Total pot 295999 Main pot 69873. Side pot 226126. | Rake 0
Board [3d 6h 4s 8h Ad]
Seat 3: ThomasToget (big blind) showed [Qs Qd] and won (226126) with a pair of Queens
Seat 4: sylvyu folded before Flop (didn't bet)
Seat 5: UnBalanced1 folded before Flop (didn't bet)
Seat 6: Almost_Phil folded before Flop (didn't bet)
Seat 8: bdohaney (button) showed [Kh Qh] and lost with high card Ace
Seat 9: tdubes (small blind) showed [Kc Kd] and won (69873) with a pair of Kings

Now, I completely agree that this definitely should have been a fold. What I am still not completely sure on was at which point it became a fold.

I am thinking that it should have been a fold after the second player went all-in, as the first player, being shortstacked could be trying to push me off of my bet, as I had been pushing him around/stealing his blind for the past few rounds. Am I thinking right in this, as KQs is a decent hand in its own right, against a player that may or may not have any real strength himself? Am I wrong in thinking this, or should this have been a fold after the first player went all in?