Why does he think we're laughing with him when we're really laughing at him?

He probably hasn't got a clue as to what is going on. He likely has a history of not reading social cues, situations, or other people's behavior appropriately. Or, he is going along with the laughter in an attempt to both soften the blow against him and/or to shake off the attack. Unfortunately, people like him just don't or won't get it until you take them aside and tell them, bluntly, what the real scoop is(and even then there is no guarantee). I would, if I were you, do just that and bar him from joining your group. Don't be surprised if, at first, he tries harder and makes more of an effort to be accepted. Whatever you do, don't give in. If you give in, you'll only be enabling him further and prolonging the misery your current group has to endure.