Its actually a really good question. When playing O8, remember that you are playing to scoop the whole pot. If you were raised in this situation and had to call off your remaining $25 in chips, you have to think this through:
1) What am I paying $25 for? In this case you'd be paying for half the pot with a low chance of scooping (winning the whole pot). If the pot was $5, you'd be paying $25 to win $27.50 (minus the rake). While you are sitting on the nut low, you really have to know what your playing or (moneywise). Someone easily could have raised with A4 as well, and then your in a rce to see whose got the better off cards....which probably is you, but you never know.
2) What kind of hand would make this play? As I mentioned, A4 would be very possible here and you'd be racing off for the high. If he has A4, he are splitting the low and will have to depend on your KK to take the other half.
In other words, yes, you could have folded. There would have had to have been a lot of money in the pot for me to call off my last $25. The pot would have to contain $50 already for me to think of calling here. I'd be too worried about getting quartered and possibly countereited (as happened).
As you'll read in a lot of books on split pot poker, you want to put yourself in a position to scoop, not take half the pot. You don't want to take big risks when you really are only playing for half because that is -EV (negative expected value).
One more note: O8 is one of my specialties and I am a FIRM believer that the game is meant to be played LIMIT, not NO LIMIT or even POT LIMIT. As you get to understand this game better, this will make sense. Its a game of draws and you want to put yourself in a position to make more correct decisions than your opponent....by playing NL (and to a lessor extent PL) you are allowing bad players to make up ground on you in short spurts.
I hope this makes sense.