Finally met and talked to the neighbor!
He admitted his actions were a bit over the top.
We've gotten the issue with the land cleared up. His main objection was centered around the fact that he thought I was going to be putting a new building in and that all of the trees were going to be coming down on the hill above his property. Then he'd be dealing with a water run-off/soil erosion issue. I can see his point.
I've agreed to call the county back and get them to look for another place for the septic system. If nothing else I can flip the lounge/bath area of the studio to the other end of the building and put the system off that end.
Another delay, but at least I've got the land dispute taken care of.