Middle set -- how should I have played it?

[jbrennen]

My first hand posting here; I hope it's okay. [img]/images/graemlins/smile.gif[/img]

Here's the situation. This is my third hand at the table, I bought in for the $40 minimum and doubled up on my first hand when I flopped bottom set and doubled up through the big stack at the table who flopped top two pair (the CO in this hand). My current stack is $88.

MP2 is one of the Full Tilt Pros, with a $240 stack.
CO is the big stack at the table with $796.

I had a tough decision here, but figured that I had no fold equity, could be behind in a set vs. set matchup, obvious flush and straight draws out there, and with no redraw to speak of (other than the case Jack), I mucked the 2nd nuts. Am I playing scared, or was this a reasonable laydown?

Full Tilt Poker
Pot Limit Omaha Ring game
Blinds: $1/$2
8 players
Converter

Pre-flop: (8 players) Hero is MP1 with <font color="red">A[img]/images/graemlins/heart.gif[/img] J[img]/images/graemlins/heart.gif[/img] J[img]/images/graemlins/diamond.gif[/img] 8[img]/images/graemlins/diamond.gif[/img] </font>
UTG calls, UTG+1 folds, Hero calls, MP2 calls, CO calls, <font color="red">Button raises to $8.50</font>, 3 folds, Hero calls, MP2 calls, CO calls.

Flop: <font color="red">5</font>[img]/images/graemlins/diamond.gif[/img] J[img]/images/graemlins/club.gif[/img] K[img]/images/graemlins/club.gif[/img] ($39, 4 players)
Hero checks, <font color="red">MP2 bets $39</font>, CO calls, Button folds, Hero folds.