[Dog Star (Phil)]

G'day again Steve,
Sounds to me like you"re a decent, considerate sort of person. Whilst some might say that it's not your problem, it is a part of your problem if you have to live next door to these people and their dog.
Confrontation should ALWAYS be a last resort, that's why I suggested trying to have a friendly chat first. It's an old truism that a problem shared is a problem halved and you may just find that your neighbour is quite willing to work with you on a situation that is less than desirable to you both. A friendly attitude (and maybe a six-pack under your wing) could well work wonders. Whilst I've never experienced the exact same situation that you have, I've managed to "tame" a few neighbours over the years with this method. (These days I live in the scrub and my nearest neighbours are roughly half a K away. Heaven!)
You don't sound like the sort of bloke who really wants to toss a bucket of water over the fence and I've a feeling that this might just put the neighbour a bit off-side if you did. Try not to do anything to escalate a minor irritation into a full blown neighbourhood row. It can easily happen. Trust me, I've been there and there's nothing worse than living next door to someone when you hold each other in mutual contempt.
IF a friendly reasonable approach doesn't work, don't waste time with a bucket of water. Dilute lemon juice with a bit of water, put it in a water pistol and spray that in the dogs face. It won't hurt it or blind it and is not at all cruel and it will be far more effective than a bucket of water.
Best of luck and I hope that the lemon juice option won't be necessary.
The Schmakos option may well be worth considering too.