Capacitors to smooth out load?

[diesel]

Looking at the RC circuit you are correct that this is a LPF. However looking at the capacitor alone (with no load) this is a HPF. Regardless, we both mean the same thing.

Getterdone,
The capacitor could be put anywhere on the circuit, and should be put where convenient. This will probably be at the switchboard where it can be fused / protected with a circuit breaker. It will be (very) slightly more effective at the dryer, but not enough to justify a difficult installation.

Without seeing waveforms / knowing THD and knowing the requirements of the dryer the cap size can't really be calculated. Cap's are cheap, so you can probably use the trial and error approach.

The reactive power supplied by the capacitor will be Q = V^2*(2*pi*f*C) where V = volts, f = frequency and C = capacitance. For example for a 10 uF cap on a 110V 60Hz system, Q = 110^2*2*pi*10*10^-6 = 45VARs. Using this as a baseline a 30uF cap will supply 135VARs.

Did you try using a bench grinder or something and see if that would get it started? An unloaded motor would be better than a loaded one (ie air con)