The thing that offends me most about your terrible situation is that the neighbor only has to make a few phone calls and you have to go to great lengths and expense to defend yourself. I really wish you could get off the "defense" and put him in the "defense" spot. THey say the best defense is a good offense. If he actually is on drugs, isn't there something that could be done to legally evict him? Look into the statutes about "prohibition of a known location for drug/prostitution/illegal activity" In some cities this would bring action against the homeowner for harboring a known felon/lawbreaker. Have you checked out his previous arrest record? You need to know more about him to turn the tables. Even if you didn't take any action against him, just knowing his background might be useful if he took you to court again. It would go toward discrediting his character and testimony against you. His uncontrolled behavior before the judge would confirm your words and it might make him less interested in challenging you later on.
Just some thoughts from a total outsider looking at the big picture. I'll pray for you.