Take your kid to the park two or three times a week to play.
Pretty soon your son and all his friends will be old enough that they won't need their mothers to set up play dates for them. Little boys generally don't exclude others the way little girls do...I wouldn't worry, although I imagine it's quite upsetting for your son at the moment. You could enrol him in a sport or activity that your neighbor knows nothing about so your son can make friends from out of school. Good luck!
I too have a psycho neighbor. She started off as sweet as could be but then turned into cybil! She has single handedly made my children unwilling to play in the neighborhood. as soon as they go outside she invites the others into her house for a treat. IF one of my boys in playing with another child she forces herchildren to come out and then waves then in and tells them they can bring in one friend. It is never my child (My oldest is 8yo and very well behaved so it is not an issue). her youngest son walked down to our home to tell my boys that the new child on the block was his friend and that they were not to try to play with him. The one time my middle son did try to play, her child came out as he walked down the block and stopped him. he came home crying saying that the new boys was not allowed to play with him.
I cannot talk to my neighbors because everytime I try to she will come out and try to exlude me from the conversations both orally and physically ( she will turn her back to me and try to form a circle away from me). When someone protested a short time ago she came to me crying and asking why I was turning the neighbors against her and her children. I have taken refuge in my house as nave my children and we make it a point to be home as little as possible now. the house will go up for sale int he spring. It is nice to know I am not crazy and I am not alone. It is all I can do not to rip her face off!
Sounds like this neighbor of yours is just jealous that you did a major improvement to your home. So she's being childish and hurting the children to get back at you. It really is sad that adults act like this.