JF, I'm sorry that you and your wife and family were subjected to such insulting behaviour. Why could he not meet you and talk quietly about his problem instead of attempting such childish intimidation? Let's hope that he apologises to you before you need to make a decision that suits family honour.
I can relate a couple of experiences that are along the same lines as yours. During a social gathering a strangely behaved young man tried to cause a disturbance. I knew him but won't go into the detail of that just at the moment. He was eventually controlled by several people but, before that happened, he went from verbal abuse to pleasantries and back to verbal abuse, finally saying that he would kill me and my family. If he had threatened to kill only me I might not have taken much notice but my family has never had anything to do with him. Understand that this creature has previously proven he is capable of killing another human being.
Yesterday afternoon, I was reading a chapter in a book written by a Canadian man about his marriage and relationship experience in Thailand. He has been here for 20 years and, in the book, carefully explains the cultural background to Thai people's behaviour. Something that I read yesterday struck home. He said that Thai people don't forgive. If someone acts against them or insults them they may take their revenge long after the offender has forgotten what he did. That really underscores what your family is saying to you and it might be better to deal with the matter the Western way than wonder what the family might do. I, of course, did certain things that would set off a chain events if anything happened to me or my family but that remark in the book has made me wonder whether I should take some more action. My large family, here and elsewhere, is grossly offended by the threat against them and they have been told the identity and background of the person who uttered it.
Another matter involves the same person. He has a habit of bad mouthing me to other people. I have asked him to stop it, saying that he would not hear from me again if he complied. I have irrefutable proof that he has committed illegal acts in Thailand and I told him that, if he continued to insult me, I would expose what he has been doing. I have recently heard that he still calls me names and makes threats against me. So, now I have to consider whether this is the time to expose him for what he really is. Or perhaps I should consider some completely different action.
I note DD's advice and he has, I believe, considerable experience of what is possible in this country.