Problem: Show that
$$G(x, y) = \frac{1}{2\pi} \left( \log \lvert x - y \rvert + \log \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert \right)$$
is a Green's function for the Neumann problem on the unit disk.
Attempt at solution: I was able to show that
\begin{equation} \begin{split} \Delta \log \lvert x - y \rvert &= \nabla \cdot \nabla \log \lvert x - y \rvert \\ &= \nabla \cdot \frac{\nabla \lvert x - y \rvert}{\lvert x - y \rvert} \\ &= \nabla \cdot \frac{(x - y) \cdot \nabla (x - y)}{\lvert x - y \rvert^2} \\ &= \nabla \cdot \frac{x - y}{\lvert x - y \rvert^2} \\ &= \nabla \cdot \frac{\widehat{(x - y)}}{\lvert x - y \rvert} \\ &= 2 \pi \nabla \cdot \frac{\widehat{(x - y)}}{2 \pi \lvert x - y \rvert} \\ &= 2 \pi \delta^2 (x - y) \end{split} \end{equation}
and
\begin{equation} \begin{split} \Delta \log \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert &= \nabla \cdot \nabla \log \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert \\ &= \nabla \cdot \frac{\nabla \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert}{\left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert} \\ &= \nabla \cdot \frac{\left( \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right) \cdot \nabla \left( \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right)}{\left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert^{2}} \end{split} \end{equation}
Hence
\begin{equation} \begin{split} \Delta K(x, y) &= \Delta \frac{1}{2 \pi} \left( \log \lvert x - y \rvert + \log \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert \right) \\ &= \frac{1}{2 \pi} \Delta \log \lvert x - y \rvert + \frac{1}{2 \pi} \Delta \log \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert \\ &= \frac{1}{2 \pi} 2 \pi \delta^2 (x - y) + \frac{1}{2 \pi} \Delta \log \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert \\ &= \delta^2 (x - y) + \frac{1}{2 \pi} \Delta \log \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert \end{split} \end{equation}
How should I proceed? Is the second term zero?
You want to show that for a fixed $y$ in the unit disk, the function $$u(x) = \log \left\lvert \frac{x}{\lvert x \rvert} - \lvert x \rvert y \right\rvert $$ is harmonic in the unit disk. Consider the change of variable $z = x/|x|^2$, which is a conformal map of the punctured unit disk onto its exterior. This transforms the function into $$\log|z-y| - \log|z|$$ which is harmonic for $|z|>1$, per your first computation.
Since conformal maps preserve harmonicity, we conclude that $u$ is harmonic for $0<|x|<1$. And since $u(x) \to u(0)=0$ as $x\to 0$, the singularity at $0$ is removable.