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Sounds like you were kind of playing scared, playing at MUCH higher stakes than you're used to online. I understand your reasoning, but the pot odds are such that you need to be 75% sure that you're beat to fold.
Even if you feel more than 75% sure that he has a hand, the guy is obviously a fish, and he could very well have K7 or T7 and think he has a monster. But the main thing is just that being that this is the first hand you've played with him (watching is different), its probably not possible to have a good enough read on him to lay this down and have it be a +EV fold. From what you've said, you haven't even seen how this guy looks when he bluffs.
Did you have more money to be able to re-buy in, assuming you lost your buyin? 200 is a pretty damn low buyin anyway, and if that was all you brought with you / were willing to spend, you probably shouldn't have been in the game. At the local 2-2-5 game, I can't count the number of players I've seen buyin for 100 or 200 and then bustout within an hour and leave the game. Maybe once or twice have I seen one of these players actually build a stack and keep it. 500 is a good amount to buyin for. 200 is only ok as long as you have more with you, are willing to rebuy, and are more comfortable playing a shorter stack. Bringing 1k with you would be optimal. If you're not comfortable bringing / losing at least 500, you probably shouldn't be playing in the game.
I have a feeling you would've called had you been properly rolled for the game, in terms of both actual BR and the amount of money you had on you.
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