Extracting value from the nuts.

[Koss]

Party Poker 0.50/1 Hold'em (6 max, 6 handed) CP hand converter

Preflop: Hero is SB with 8[img]/images/graemlins/heart.gif[/img], 7[img]/images/graemlins/heart.gif[/img]. CO posts a blind of $0.50.
<font color="#666666">2 folds</font>, CO (poster) checks, <font color="#666666">1 fold</font>, Hero completes, <font color="#CC3333">BB raises</font>, CO calls, Hero calls.

Flop: (6 SB) 9[img]/images/graemlins/club.gif[/img], 6[img]/images/graemlins/spade.gif[/img], 5[img]/images/graemlins/heart.gif[/img] <font color="#0000FF">(3 players)</font>
Hero checks, <font color="#CC3333">BB bets</font>, CO calls, <font color="#CC3333">Hero raises</font>, <font color="#CC3333">BB 3-bets</font>, CO calls, Hero???

To me it's pretty clear the BB has an overpair or a set. Most likely an overpair. He's been pretty passive so far and the 3-bet is definitely out of character. When the CO calls 2 cold it's pretty obvious he's not going anywhere. Cap it here or call and go for the turn check/raise?