Hi Scott,
I really want to be funny and say it must be a Mexican caterpillar, but I honestly can't say for sure what kind it is. I can't even imagine a caterpillar eating a Jalapeno pepper! Gardeners for decades have been using pepper sprays to keep pests off their plants. To think you have a caterpillar wanting to eat your hot pepper is amazing.There is a Bt (Bacillus thuringiensis) product that I have been using for years that works absolutely perfectly, (hard to make that claim for many organic products but this one is great!) It is only harmful to caterpillars, they eat a little of the plant with the Bt sprayed on it and stop eating. They die of starvation in a few days. It is non-toxic and a 'must have' for anyone growing brocolli, cabbage and other brassicas. I like MVP II from Gardens Alive, it is their best Bt. I only have to spray it once in a while instead of the older type that needed to be reapplied after rain or watering or several days. A little goes a long way so don't let the price fool you.
You can find their website link by going to our 'Market Place' button on the front page. We have them as an affiliate because we use their products here at our Organic Produce Farm and it is hard to find good organic products in the stores. We have been using Gardens Alive for over 10 years.
Happy Gardening, Diane