Thanks for the feedback all.
Just got back from work. Yesterday, I met up with a retired LEO friend, and not surprisingly, he said there wasn't much we could do, other than move, or get a 410 based on the neighborhood we live in. He said lay low, and not stand out in any way.
Fortunately, my wife doesn't crank outdoor music or participate in tacky light displays, so that's good.
As for the dog, this is her:
You can google "Santa's little helper" for a complete breakdown of this dog.
She would be the "weakest link" in this equation. Previously, my wife has defended the dog's noise as a justified response to other "bad dogs" in the hood, a justification I no absolutely no agreement with, and I say no more, realizing she might see this thread
Considering that she and our daughter stated tonight that "they are scared" the neighbor is coming back, this might be a good time to discuss dropping the "other dog is at fault blame game" and to consider a collar, or more discipline.
Perhaps as stated, the dog might not push his buttons. Hope springs eternal.
Good camera system is a good idea too. My flip phone mentality won't assimilate, but my wife has smart phone smarts. Perhaps a ring system or equivalent.
I'm a little torn on how to deal with him too. We were good friends. His house was the weekend neighborhood hangout. That's all changed, people aren't going to be hanging out there, and I'm still trying to decide how to approach this. I don't want to act all weird by not hanging out, but I can't really get into acting like nothing happened.
Fortunately, for me, he will have to make amends with the car owner across the street, and another neighbor, whose tires got punctured by all the crap he threw in the road (bolts and screws and stuff) as he was tossing his belongings out in the yard.
I'll let him deal with them first, if he deals with them at all.