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Shoot the mother-in-law!
Seriously you do have other options, first talk to your future spouse, have them apply the necessary pressure to your MIL (that shouldn't be your job). (It should be noted that if the future spouse won't do this, you have bigger problems than dead chickens!) Secondly you could always get a dog that your MIL is scared will maul her beloved fido... perhaps an Anitolian shepherd or another herd guardian.
Hopefully your future spouse didn't inherit their mom's lack of perspective and dare I say, common sense! For the record I have a highly prey driven Boxer (busted out 4 windows attempting to get to neighborhood cats in our old home, even had to call animal control to get a neighbor to reduce their out of control cat population after she 'caught' one in our fenced in backyard) and I have the common sense to not let my dog wander in a yard with 'prey/chickens' unsupervised. Fwiw when supervised I can keep her completely under controll, but wouldn't trust her for 5 seconds without me present in the company of a flock! (I don't have my flock yet, we'll have to work on it... I believe in her)
As for the OP, it seems you're well within your rights and in good moral standing (often two different things) in regards to destroying this dog. You've been more than patient but I too share your partner's fear that the neighbor will 'retaliate' and I don't know how much your pets or livestock roam into his yard. Shooting the dog with rocksalt is a very VERY valid suggestion and a good middle ground showing you mean business, know that if you shoot it from less than 20-25 ft away it could be lethal. Also while the neighbor does seem to be hard headed, there may be room to work with them if you can impress upon them what the dog has cost you in terms of time and money. Someone had great advice of writing the cost and time down on paper and showing him. At that same 'show him the cost' meeting I'd ask him to reimburse you for the cost of 'ALL' chickens lost. Asking for money will set the reality of the situation in cement for your neighbor. Sadly you know your neighbor and the situation best and these options may be too little too late.
As something of a dog behavior hobbiest, due to dealing with my tightly wound Boxer/fostering several dominant breed dogs, I'd like to make something VERY clear. There is a Grand Canyon sized difference between animal aggression and people aggression in dogs. The two are simply not related 99% of the time. Because a dog kills chickens, chases horses, and harasses pigs doesn't mean it's gonna maul innocent children. I totally disagree with a statement made by a previous poster that this was essentially an attack waiting to happen, but only YOU and your neighbor are capable of properly assessing this dog and your situation. Also don't believe the hype surrounding APBTs. Multitudes of independent studies prove there are several dog breeds with higher human bite rates than APBTs, in many studies they don't even rank in the top 10 and along with Labs are the most incorrectly identified breed (due to fear and media frenzy I suspect). FWIW Lab's and several Shepherd breeds are recognized with high bite rates, the numbers are also skewed by the fact that most small dog bites go unreported due to the lack of damage, and it is suspected some small dog breeds may actually lead the way in attack numbers... just food for thought. This is why breed specific legislation is simply ignorant of facts and based on politics (getting re-elected by playing on people's fears), ignorance, media sensationalizm, and fear. Granted when an APBT bites, people/livestock/whatever it is quite often serious because of their bite power and tenacity (I assure you the same is true if a Great Dane or many other breeds bite). It's what they were bred for... but guess what so were Boxers, Great Danes, English Bulldogs, American Bulldogs, all Bully breeds, MANY breeds of terriers, most Mastiff type breeds, Dauschaunds, and more. THERE ARE FEW BAD DOGS, but BAD OWNERS are a DIME A DOZEN!
Good luck to both of ya,
Phillip