5/10 How BAD is this?!!!

[BuBu_]

Villian is a very solid multi-tabler. He is quite a loose caller PF, but very good after flop. This is my 5th hand at table so Villian doesn't know much about me, because I am under a different screen name.

Villian is in BB with $2674. Hero is on button with $1163.

All fold to Hero who raises to $35 on button with T [img]/images/graemlins/diamond.gif[/img]T [img]/images/graemlins/heart.gif[/img]. SB and Villian (BB) both call.

FLOP ($105) 9 [img]/images/graemlins/club.gif[/img]8 [img]/images/graemlins/club.gif[/img]7 [img]/images/graemlins/spade.gif[/img]
Villian leads for $80. Hero raises to $240. Villian reraises to $825. Hero has $888 behind with pot at $585. Hero folds.

I put Villian on a set (my equity approx 33%) or a straight (my equity is crap). Or possibly 2pair (my equity is approx 50%). Or straight flush draw (my equity approx 55%).

I felt a set or straight were by far the most likely, because lead reraise is his strong hand line, but it felt very wrong folding such a good hand?