I assume that you have a shared driveway. Nice of him to stake out his property. I'd hire a surveyor to get an accurate property line. Then I would erect the tallest fence allowed by law.
Short term I would install a 300 Watt motion sensing light that covers your car and property. You can also pick up an outside video camera from Radio Shack and a time lapse video recorder. This will document any intrusions by your neighbor.
The restraining order is the way to go. As he has threatened to shoot your dogs (and you, catch my drift) the police will require him to turn in his weapons.
I would never turn my back on a bully, this only encourages them.
Good luck.