M.P.
I'm a retired police officer. The police and animal control can do nothing in this situation. It's a "neighborhood problem" caused by the personalities of the people involved. This situation is not legally harassment. I agree that the dog owner is doing more than I would expect anyone to do in an effort to stop the complaints.
I suggest that the next step is for her to go to the Neighborhood Mediation Office and ask how to get this into mediation. You can call the police non-emergency number and ask for their number.
I also think that doggie daycare would be a good idea. It must be expensive to have dog nannies come in. Daycare may be less and as others have said, will give the dogs social stimulus and exercise.
Later: And neighbor 1 needs to not pay attention to the texts. Once the neighbor sending them realizes that they have no affect he'll stop sending them. He may escalate his complaints. That's why getting into mediation now is important.
I suggest that it may help if neighbor 1 validates neighbor 2's feelings. Talk with him letting him know that you understand his frustration. Be sympathetic. This, in it's self may reduce the friction between them. He may be being so persistent because he doesn't feel heard and understood.