What would you do?

i inflicted this setup on a player last game and he resigned soon after. what would y

What's wrong with capturing the knight? My tactical ability is near useless, so someone correct me if I'm wrong

 If black takes the knight he loses his queen: 12. ... fxg6 13. Bxd6

Best for black is probably 12. ... e5 when

13. Nxe5 Nd7 14. Nxf7 Qxf4

or

13. Bxe5 Qe6 14. Nxh8 Qxe5

where in either case black is down, but would hope to trap the knight on h8.

uuh the queen is under attack, so i would move that piece out of the way and lose a rook.  Its impossible to save both, but good news is the knight is trapped in the corner.  Also hopes of castling are gone and around 3-4 moves would be wasted to bring king to safety.

but if the queen tkaes the bish, my knight can take queen

As swestland said it's best to move 12. ...e5

Black will loose a rook, win a bishop and trap the knight. And actually if black makes sure that the knight doen't get out, this move by white could be to black advantage.

But as i see it it's a big loss to loose the ability to castle on blacks kings side, since it is his stronger side.