I would not do it. You hold ALL of the liability with a man made damn as the landowner that has it and your neighbor gets the benefit of a lake. If anything happens with that damn, then you are liable. Even if it is just a cow or two now, what happens in the future. You expect that damn to be there for more than a few years, so what happens if there is a pre-school build down stream in the future?
Also, if he is in a boat, you cannot keep him off 'your' part of the lake water. You put in a lot of work to make an underwater structure on your side and he does nothing other than get in a boat and fish your spot.
Fences make better neighbors (especially with the jerk history you have with his family).
