25NL, 88 flops a draw against a fearless villain

[PotatoStew]

Villain is a little on the loose side, but not to an extreme.

PokerStars No-Limit Hold'em, $0.25 BB (8 handed) Hand History Converter Tool from FlopTurnRiver.com (Format: 2+2 Forums)

UTG ($25)
UTG+1 ($28.25)
MP1 ($25.30)
MP2 ($18.20)
Hero ($27.20)
Button ($7.65)
SB ($47.60)
BB ($24.50)

Preflop: Hero is CO with 8[img]/images/graemlins/club.gif[/img], 8[img]/images/graemlins/heart.gif[/img].
<font color="#666666">2 folds</font>, MP1 calls $0.25, MP2 calls $0.25, <font color="#CC3333">Hero raises to $1.25</font>, <font color="#666666">2 folds</font>, BB calls $1, MP1 folds, MP2 folds.

Flop: ($3.10) 7[img]/images/graemlins/spade.gif[/img], 6[img]/images/graemlins/diamond.gif[/img], 9[img]/images/graemlins/club.gif[/img] <font color="#0000FF">(2 players)</font>
<font color="#CC3333">BB bets $1.75</font>, <font color="#CC3333">Hero raises to $4.25</font>, BB calls $2.50.

Turn: ($11.60) 4[img]/images/graemlins/club.gif[/img] <font color="#0000FF">(2 players)</font>
<font color="#CC3333">BB bets $2.5</font>, Hero calls $2.50.

River: ($16.60) 3[img]/images/graemlins/diamond.gif[/img] <font color="#0000FF">(2 players)</font>
<font color="#CC3333">BB bets $2.5</font>, Hero calls $2.50.

Final Pot: $21.60

I think I played it fine up until the river here - should I have given up there or seen a showdown? If the pot was smaller, I probably would have ditched it to his river bet, but as it was I couldn't bring myself to do it. What sort of hands do you put the villain on?