Is it right to refrain from making a takeout double in borderline situations?
This is in part a matter of style, but I would happily make a takeout double with that hand.  In my experience (which I think agrees with prevailing expert opinion), it is better to be aggressive in competitive bidding at low levels, and get more cautious when the bidding reaches the 3 level.

Advantages to bidding:


You have the opportunity to find a contract for your side
You interfere with the opponents' bidding, giving them a chance to make a mistake and making it harder for them to use their conventions (though this is not a big factor for takeout doubles)
You give partner information which may be useful on defense


Disadvantages:


You may end up in an impossible contract and go down badly (perhaps doubled)
You give the opponents information which they can use if they win the contract (as happened in this case)


If your partner is good, he is less likely to push you to a crazy contract.  On the other hand, experienced opponents are more likely to double if you end up somewhere bad.

The most important factor, though, is the possibility of finding a contract where you can make.  RHO (North) is potentially no stronger than you, so there is a good chance that you have half the points or more.  You should have a shot at making something.  However, if you pass and LHO bids, your partner will likely have trouble bidding unless he has a good enough hand and suit to overcall, and he will likely need to bid at the 2 level or possibly higher if South jumps.  You are probably the strong hand in this partnership, so if you pass now, there's a good chance you are giving up any opportunity to win the contract.

Naturally, there are no guarantees.  Sometimes you make the right bid and it ends up hurting you.  Bidding well and playing well are both a matters of percentages -- you should make the play that has the best expected outcome.