Get some liquid and dose his drink. You could just sneak up to the back door and holler La Migra La Migra Departmente Imagracion!!! just to see how fast he runs.
i say go down to the local police station and ask them what to do. you definitely don't wanna start a fight with some lunatic who swings a knife around all the time. i saw someone else suggest sitting down and talking to him. that might help too. if there's a way you can communicate with him. i get the impression that he only fucks with you because he's paranoid about what you're really not saying and what you're really not doing to him.
In this case, snitches get a tap on the back and a handshake from a thick necked immigration cop. The more the merrier?
not really, illegal, screaming, ranting, heavy dose of acid he can't handle. shit, what can he do about that? police will notice, arrest, and deport.