score:3
Found it!
It turns out I took a photo of the sign I mentioned.
BIENVENIDOS A STGO. MATATLAN OAX.
"CAPITAL MUNDIAL DEL MEZCAL"
The town is called Santiago MatatlΓ‘n and styles itself "World Capital of Mezcal".
It's about a forty-minute drive southeast of Oaxaca City and not so far from two major local tourist destinations: The ruins at Mitla and the rock formations at Hierve el agua.
There's also a pretty good and recent blog post on Santiago MatatlΓ‘n and its mezcal by a guy called Dave Miller.