Flight instructor with student reported a NMAC while in the traffic pattern at a non-towered airport when a departing aircraft took off from the opposite end of the runway in use.

Narrative

While several flight school aircraft were operating in the pattern at ZZZ [airport] for runway XX the AWOS was reporting winds calm; however we noted through both the windsock and aircraft performance that the wind was really favoring runway XY and we were landing with a marginal tailwind. All flight school C172s (a total of 3 at the time) discussed over CTAF and reorganized to join a pattern for runway XY without issue. On a touch and go myself and my student noticed a twin Aerostar taxi without any radio calls to the departure end of XX and noted the possible risk of a runway incursion. He held short and we continued left traffic. Another flight school aircraft was turning approximately a 3/4 mile final and announced it over CTAF. Immediately after the Aerostar makes a radio call along the lines of 'Aerostar departing runway XX; the CORRECT runway if any of you could actually use this cool tool called a windsock on the ground and paid any attention' in a very aggressive tone. The aircraft on final immediately repeated that they were on short final XY; to which the Aerostar announced 'I'm already on the correct runway that the wind is favoring so get go around and deal with it'. From our position in the downwind we could clearly see he was at least 5-10 feet short of the hold short line and still stopped even after his call; but elected to enter the runway anyway. His departure path came closely under the final traffic; right behind traffic that was crossing midfield to join the downwind; and right over a helicopter entering the pattern. Each aircraft had limited room to maneuver but fortunately all were highly aware and able to avoid. The Aerostar made a few more snide replies about no one but him being able to read a windsock before departing the area. We continued our lap in the pattern after his departure and noted the windsock showed nearly no wind; barely a slight breeze favoring XY.