Couldn't you have, oh I don't know, talked to the owner perhaps? I'm having a hard time justifying such drastic measures in my mind for something that was nothing more than an annoyance, what with it being fenced in and all. You say the pen is mightier than the sword, but if you really believed that, the first course of action would have been to call your neighbor and discuss the situation. Having the dog taken away and giving the owner a $400 fine should have been the absolute last resort.
To put it in perspective, what would you have done if your neighbor instead had an annoying, loudmouth kid who played bad music too loud and set off firecrackers in the yard. Would you still have considered guns and mace? I'm guessing not, when in reality, a really nasty kid is more dangerous than a chained up dog, no matter how loud its bark. I'm not suggesting that it's okay to shoot or mace kids, but I don't think it's fair to shoot or mace dogs either.
Also, I agree with Pink Glitter - one of the sweetest dogs I have ever met was a pit bull. It's all about how they're raised - if you're a dick to a pit bull while it's growing up, it will be angry and vicious. If you treat it like you should treat a dog, it will grow up to be just like any other dog.