For 230Vac application a 275V MOV will start to clamp at around 700V - this is probably the best bet across the relay terminals, if you really want to snub it you will need 1uF 275Vac X2 cap and 22 ohm 3 watt resistor....
Right. The total energy stored in the motor is being dumped on the capacitor and resistor. With a 1/2 HP motor, that can be significant.
Because the load is supplied with AC, we do not know at what point the relay is getting turned off. Perhaps the relay can be turned off at zero crossing?