Analysis of another bad hand

I want to go over a hand I played 4-handed in the 180 that I wrote about earlier in a little more detail.

POKERSTARS GAME #10972252457: TOURNAMENT #55621207, $4.00+$0.40 HOLD'EM NO LIMIT - LEVEL XIII (1000/2000) - 2007/07/16 - 15:58:09 (ET)
Table '55621207 17' 9-max Seat #6 is the button
Seat 2: stefjuuh (39979 in chips)
Seat 4: Kajagugu (96860 in chips) - I am the chip leader 4 handed and probably the most active player at the table. My image is shot and I have been really bullying the table in the last few orbits. But when I show down hands they are usually good.
Seat 6: acemaster82 (76994 in chips)
Seat 7: TOWBAR29 (56167 in chips)
stefjuuh: posts the ante 100
Kajagugu: posts the ante 100
acemaster82: posts the ante 100
TOWBAR29: posts the ante 100
TOWBAR29: posts small blind 1000
stefjuuh: posts big blind 2000
*** HOLE CARDS ***
Dealt to Kajagugu [8s 8d]
Kajagugu: raises 6000 to 8000 - Ever since the blinds got to this level this has been my standard raise.
acemaster82: calls 8000 - He is second in chips and in the SB. I don't like this call.
TOWBAR29: raises 20000 to 28000 - This is about half his stack. It seems like either a squeeze play or a resteal. I didn't actually put him on a range of hands here.
stefjuuh: folds
Kajagugu: raises 68760 to 96760 and is all-in - I had a few options here:
1) Fold - I don't think 4-handed this is a great move, but since the SB called my raise maybe I can get away with minimal damage here?
2) Call - This is a tricky one because I don't know what the SB will do. He is pretty much priced in with 64K in the pot and having to call another 20K gives him 3-to-1.
3) Re-raise - Well, any re-raise here will be an all-in to isolate the BB. I chose to shove and I am still not sure this is such a big mistake.
acemaster82: folds - Good.
TOWBAR29: calls 28067 and is all-in - Uh oh - not so good?
*** FLOP *** [7h Qd Ah]
*** TURN *** [7h Qd Ah] [7d]
*** RIVER *** [7h Qd Ah 7d] [5s]
*** SHOW DOWN ***
TOWBAR29: shows [Th Tc] (two pair, Tens and Sevens) - Crap, this was not supposed to happen!!!
Kajagugu: shows [8s 8d] (two pair, Eights and Sevens)
TOWBAR29 collected 122534 from pot
*** SUMMARY ***
Total pot 122534 | Rake 0
Board [7h Qd Ah 7d 5s]
Seat 2: stefjuuh (big blind) folded before Flop
Seat 4: Kajagugu showed [8s 8d] and lost with two pair, Eights and Sevens
Seat 6: acemaster82 (button) folded before Flop
Seat 7: TOWBAR29 (small blind) showed [Th Tc] and won (122534) with two pair, Tens and Sevens

After the hand the table talked about it and I made the comment that if I just smooth called I could make him fold on the flop. With two overcards, one of the being an ace I might get it checked to me and then I could put him all in. But that only happens if three things happen:

1) The SB folds to the BB re-raise and my smooth call.
2) The BB checks after the flop.
3) I have the guts to not put HIM on a high ace and a slow play on the flop.

So what do you do in this hand? How do you play it differently? I am still not sure that my shove is all that wrong in this position. Folding pre-flop to the re-raise seems very weak in my opinion as well. I'd love to hear your comments. Thanks.