Yes, exchange the bishop. That will cramp black's pieces for enough time for white to double up his rooks along the e file.On 1. Bxe7, black's only decent response is 1...Nxe7 (if 1...Qxe7, then Nxg6+ with a discovered attack on back's queen). Also, white's knight on e5 is very strong, and will be more difficult to move.
A Question

To get everything in perspective, the black king is now on h8....if it is blacks turn to move then bishop takes bishop would be the correct move but if it is whites move, the best move would be knight takes pawn at g6 check, when king moves, irrespective of what square it goes too, the next move for white would be knight takes bishop where its pieces are supported by bishop and rook

VernalFire wrote:
To get everything in perspective, the black king is now on h8....if it is blacks turn to move then bishop takes bishop would be the correct move but if it is whites move, the best move would be knight takes pawn at g6 check, when king moves, irrespective of what square it goes too, the next move for white would be knight takes bishop where its pieces are supported by bishop and rook
You may want to check those lines again. After 1 Ng6+ Black does not need to move his King.
Yes White should probably trade the dark squared bishop. Most of Black's pawns are on light squares which severly limits his light squared bishop's mobility. It will take forever to rectify, if at all. White has a dark pawn chain on the Queenside partially limiting his dark squared bishop and that bishop cannot attack most of White's pawns. Everything else being equal, trading the weak bishop for the strong one is a good exchange.

VernalFire, while I applaud that you're thinking tactically... if 1.Nxg6 the king doesn't move. Instead Black replies 1...Bxg6. ;)
I would play 1.Bxe7 because: (a) retreating wastes time and (b) the e7 bishop is Black's good bishop... it's not cramped by its own pawn structure.
1.Bxe7 Nxe7 2.Re3 Kg7
As far as how to continue, controlling a fully open file is nice but often not enough by itself... Black can strive to trade off his rooks or at the very least control the penetration points. White's best try may be opening a second line of attack:
3.Qb3! Qc7 4.Rae1 Nc8 5.c4 dxc4 6.Bxc4
White has practical chances.
Here is a I came a diagram across. I was wondering what you do with this particular situation.
The diagram was discussing whether to exchange Bishops, Black made the move Kg8. And should you exchange Bishops, curious to thoughts and ideas.