Lynne....I don't think I could take that dish.

Don't believe my answer.

It means: If you cook a dish of limberger cheese and linguini, topped sauteed seaweed, I can take the dish and put it on the table, but I am not sure I will eat it. :)

Dan is right. "Bring it on....." "Take your best shot!"

It's a real phrase. It means "no matter what you do to me, I can take it." In this sense dish out means throwing something at you or producing some challenge. So, someone could say this if they are competing with someone in sports, a fight, a debate, etc as they are comparing it metaphorically to a violent fight.