Tough situation for sure.
I am in the 'don't like wood fire' group cause it wrecks havoc with my sinus etc....and I would opt for a propane solution, but that is me :) :)
You could compromise but I see your side, your property, legal to make a campfire and tough on the neighbor.
WHAT WOULD YOU EXPECT from the neighbor if you were the one complaining and having smoke/smell issues? IF YOU CAN truly think that way, see their side and what you would expect, maybe you can come to an understanding?
I feel for you tho.