Villain 1: Seat 7, the only other good player at the table. Early 20s. TAG. Played with him before and he knows I am the only good player at the table besides him and vice versa.

Villain 2: Seat 1, okay player, had just sat down. Mid 20s.

Hero: Seat 3, LAG, a winning 2-5 player.

Stacks: Villain 2: $500, Hero: $1400, Villain 1: Covers

Button on Hero. Villain 1 limps in, Villain 2 makes it $25, Hero calls on BTN with 77 Villain 1 calls. At this point I am putting Villain 1's range at small PP's and suited non premium cards.

Flop ($77) 655
Villain 1 checks, Villain 2 bets 65, Hero calls, Villain 1 c/r to $135. Villain 2 fold. Hero...?

A basic min raise is a pretty weird line to take against a competent player.

Ewww. Gross spot, and given dynamics and the fact that it seems he is begging for somebody to continue in this pot with his near-min raise, I would probably fold. But I play a TAG style bordering on nitty lol.

I just fold. C/r into two people is strong and we will have a hard time continuing no matter what.

Either fold or raise the $65 cbet. Your hand isn't strong enough to just flat. You probably thought you were way ahead or way behind when in reality you're either not that far ahead or way behind. Your plan pre was to set mine right? Why did you change your plan on the flop?

If you raise the $65 and V1 3 bets you can easily fold. Calling here just sets you up for a really tough turn/river decision. What do you do if V1 folds flop and turn is a Q? Or a J? Or an A? Or any over card to a 7? Basically the only way you're confident to show down this hand is when another 7 comes, so either fold to flop bet or raise and try to win without showdown...

I would probably call planning to fold to another bet, you have really good pot odds and not too many hands that beat you, A5s, 66, maybe one combo of 65s, maybe 54s but that's a stretch.

You still have monsters in your range so he should not be inclined to bluff turns.