I agree with Opinionista. When Jack mentions Mexico, it reminds Ennis of what he has heard about Mexico (where he would have heard this, I have no idea -- I can't imagine Ennis, say, shooting the breeze with his fellow ranch hands about good places to go for gay prostitutes -- but let's chalk it up to literary license). This arouses Ennis' suspicions, which maybe even already existed, that Jack has strayed. But Ennis lets it pass for the moment, still hoping to get Jack to lighten up on him.
But when Jack issues that devastating "I did, ONCE," coupled with his already grim demeanor that day, Ennis gets scared. Hell, I got scared at this point! Jack has always held out the possibility of them living together, and even though Ennis wouldn't take him up on it, he was probably comforted to know Jack still wanted it. Now, Jack is putting it in past tense, as if no longer interested in doing that. Ennis detects in Jack's tone a signal that Jack may be getting sick of this, and it terrifies him.
And, as usual when Ennis is afraid or upset, he expresses it by lashing out in anger. So he seizes on the Mexico thing to throw back at Jack. We always argue about whether Ennis is angry about Mexico because he's jealous of Jack with other men or angry because it forces him to acknowledge their mutual gayness. Personally, I think it is more the former. To me, the way he says "boys like you" suggests he has accepted, to some degree, what kind of boy Jack is (even if it implies something, by extension, about himself -- unlike Chris, I think Ennis has moved somewhat, though not completely, beyond the "I'm not queer" stage). And I think that Ennis, though unconcerned about Jack's involvement with women, takes his involvement with other men much more seriously (making John Twist's later revelation about Randall that much more painful). Anyway, threatening to kill Jack seems a bit over the top, but Ennis is angry and, with him, that entails violence.