Plain and simple, if you're doing nothing wrong:
Ignore him.
Let him eat up his sanity with whatever ridiculousness he's going on about. You can't change or help people like that because they don't want to be helped, they just want to be a PITA. Don't give him what he wants, ignore him.
But, I would get one or more HD cameras and point at least one in his general direction. Or maybe position it so it's looking at your driveway from the other side of the house, but the peripheral gets the street and sidewalk on his side. That way he won't think now you're filing him 24/7 (which could drive his mind even further down the rail on the "crazy train"). As long as he just is a general nuisance and an irritant, no issues and the recordings are of no consequence.
But if he starts being the neighbor who goes from being an irritant to someone who is damaging your property (or worse) you've got evidence to take to the police and get something done about it. But the problem with that is he will still live there. Short of being incarcerated, he's always going to be there. They can't make him sell his house and move because he's a problem in the neighborhood.
The whole daycare/bright light thing is just effing creepy, more so that he's willing to go through so much trouble to see through the one way film. He may think (in his own messed up way) he's doing something like "protecting the kids" or filming an "illegal business", but the one-way film is hiding little kids away from creepers and is for the kids safety. I also find it disturbing that he would do so so publicly. That means he has no compunction about pissing the neighbors off or doing something so extreme. That's kinda scary right there, who knows how far this moron will go? I know I wouldn't want to find out...
I'd probably consider putting up "screens" in the yard that I could have vines growing up to make a visual block to "creepers'. As long as your local ordinances allow it that is, because it will give the creeper across the street one more thing to complain about if it's not. And if your new HD camera catches him on your property trying to see around the screens, you got him for trespassing.
But again the critical point here is if you're doing nothing wrong; ignore him.
I'd avoid direct conflict with him, given the BS he's already doing. I'd even consider not engaging him in polite conversation. It doesn't seem like he would receive that as an honest attempt to get along but rather a direct challenge to him and what he wants to do. These types of people are already not thinking right, they've gone down a rabbit hole of their own choosing and a quite happy there down in the muck. You don't want him to get pushed (in his own mind) a little further and you be the object of his perceived grievances. He's already proven to you he's not completely "stable" and these days, that seems to be a recipe for disaster in the USA...
Every neighborhood seems to have at least one irritating neighbor. Best just to give them as wide a berth as possible....or sell the house and try a different neighborhood. You might get a better community, you might not.
I swear, I don't recognize this world any more....what is wrong with people these days.....seems like getting along for the common good is a thing of the past.
It's like it's all me, me, me now.....
