I have a white noise machine as well, and though it's a nice product, the sound isn't NEARLY as loud as a good old box fan on high. In the winter, I back mine up completely against the wall so no air is able to come through it...and my kids and I are pretty much dead to the world.
It might not cover up a night club, but I'm almost positive it's better than what you have.
I do have one question, though. Have you ever had your baby sleep somewhere else that was quiet? For example, have you visited relatives or something and been able to put him down in their house? Because as obvious as it might seem that the noise is causing his sleeplessness, it's always possible that something else it causing it and he would continue to wake up even in complete silence.
Acid reflux would be one example of something causing sleeplessness. Also, it took me YEARS to figure out that my daughter woke frequently at night because she was too hot. To this day (at 4 yeard old), I have to keep her room colder than everyone else's if I want her to sleep well.
No matter what, though, you clearly have an insane neighbor. It seems to be bad enough that you might consider moving. If that's not possible for you because your home is not currently worth as much as you owe, I would even consider trying to short sell it or allowing it to go into foreclosure simply to get away from that oppresive maniac you have next door.
If it were my neighbor, though? I admit that my husband and I would probably have resorted to vandalism by now. :-)
EDIT: It also occured to me that if you can find out this guy's full name, you should be able to go onto your county's database (mine has a website) and find out if he has any outstanding warrants. You'd be surprised at how many people do. If he does, wait until you're sure he's home and call the police to report his location.