Here's an interesting excerpt from a biography that suggests there weren't any hard feelings between Ronnie and Neil. There's a surprising amount of documentation (and preposterous opinions) on the subject.
Ronnie VanZant in his Neil Young "Tonight's The Night" shirt
Neil Young performing in a Lynyrd Skynrd T-Shirt
From the book Freebirds: The Lynyrd Skynyrd Story by Marley Brant:
"The presentation of the song "Sweet Home Alabama" in concert was accompanied by the unfurling of Skynyrd's traditional backdrop, a huge Confederate battle flag. The reaction of the audience was always the same: vigorous, fervent, and instantaneous. Neil Young's song "Southern Man" had offended many Southerners by seeming to accuse all people born in the south of being intolerant racists. Young's observations were obviously generalized and not accurate and Southerners were ecstatic when Skynyrd defended their honor by releasing "Sweet Home Alabama" with its direct references to Young's faux pas. The idea that the Southern man, or woman, didn't need Neil Young around to point out the problems of their society was overwhelmingly supported by Skynyrd fans.
"We thought Neil was shooting all the ducks in order to kill one or two," Ronnie told Rolling Stone magazine regarding the creation of the answer song. The band felt that Young's lyrical content was representative of the shortsighted "Yankee" belief that all Southern men should be held accountable for the verbalizations and actions of a racist minority.
While the rebuttal was heartfelt, Skynyrd held Neil Young in high regard for his musical achievements and they weren't intending to start a feud of any kind. "Neil is amazing, wonderful... a superstar," said Van Zant. "I showed the verse to Ed King and asked him what Neil might think. Ed said he'd dig it; he'd be laughing at it." Ed King says that the tune was not so much a direct attack on Young but just a good regional song.
The song was well received but immediately put a stigma on the band as rednecks. Producer Al Kooper added. "Hey, you have to be more careful when you write a song now. But I'll tell you something -- Neil Young loved it. That's true, he told me so to my face."
NOTE: I was remiss in attributing my source of material for this post.. It comes from "Thrasher's Wheat", avery active Neil Young fan site- Link to their story here
IThis update after the comment below- Sorry, guys.