Strategy on the BB play in a MTT

I dont have a hand history but here I go anyways.

$32,000 Guarenteed MTT on FullTilt this weekend. +- 1600 entrants; money pays to the 162nd place.
Ive got approx. 15,000 chips and in the BB (The average Chip Stack is approx 17,000). Blinds are 400/800 and antes are 50. Everyone folds to the SB where he bets the minimum 800. So 800 to me to call a pot of approx 2800, I have Q7 and know the SB is going to have to make a move soon; he has 12,000 in chips.

I call, Flop comes Qs8h2h, he checks i bet 2,000 and he check raises me another 3000 to me. He's been a pretty loose player this tourney and I think maybe he's making any move or atleast 4 to a flush. I come back over top and our showdown show's he has AQ. Cripples me.

Show me the error of my way... Should I have folded preflop, I know my cards arent good but you cant just play big hands as the 10 minute blinds are really starting to mount up, plus i was more than enough getting odds.
Anyways tell me how you would of played this.

Thanks

after seeing flop, its hard to fold, also knowing he is a loose player, but i would fold preflop. thats my decision, if i dont have a good feeling about a hand, if i think a hand can make me lose chips, i fold it. i normally fold jacks or AK if big raises before me and three players are in game. q7 i definitely fold. also 10 minute blind is normal and u had lots of moves to go, u mustnt be in a hurry i think