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I know someone who filed a police report after their car was damaged intentionally (it looked like someone took a bat to it). He said there was a history of this stuff happening and the cops took note of all the damages. The cops didn't do jack, but the report helped him when he claimed it to his insurance. The insurance actually paid up! he was an older guy, so maybe they trusted him, but still they paid...give it a try.
You'll probably never have the evidence necessary to convict the asshole next door, but if you're sure it's him then I say handle that. Fuck him up, but not too bad where serious charges can be pressed. If you can, let him swing first (have a couple witnesses) then beat his ass something severe.
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