Small pair in the SB, is it correct to call a raise? (Stars 5-10)

[D. Bosola]

Very basic question. Fairly new to limit, I'm a NL junkie so this should be elementary to me but sadly it isn't. Would like to get your opinions on whether I should have called or folded this hand. I'm not sure whether the bets I'll spend calling and missing compensate for the many bets I'll occasionally win when I flop a set.

Considered a number of factors here:
1) POT ODDS: I barely have the straight pot odds to call: There are 3.5 BB in the pot and it costs me half a bet so I'm getting 7-1. Assuming the big blind calls, I'll be getting 8-1, but if he folds I'm not quite getting the odds I need (roughly 8.5 to 1 to flop a set if I recall correctly), and if he reraises, I'm really getting screwed.

IMPLIED ODDS: I can probably count on squeezing at least two more bets out of the people behind me if I hit a 7, possibly three of four if they also hit the flop. But the problem is:

POSITION: My position is abysmal and since this is a limit game, my positional advantage is not compensated for by abnormally high implied odds. In fact, my implied odds are worsened by my being first to act on every street, which will make it difficult to extract the maximum if I hit.

PokerStars 5/10 Hold'em (8 handed) Hand History Converter Tool from FlopTurnRiver.com (Format: 2+2 Forums)

Preflop: Hero is SB with 7[img]/images/graemlins/heart.gif[/img], 7[img]/images/graemlins/diamond.gif[/img].
<font color="#666666">
Hero posts $2, BB posts $5. 4 folds</font>, <font color="#CC3333">CO raises</font>, Button calls.

Hero...?