Hi,
Generally I agree with the replies above...
a pedantic view:
* the headline talks about "LM317"..but the problem is in now way related to LM317
* the question is not addressed to "switch ON condition". But for switch ON condition, I agree, that the C1 will cause a short peak... but very soon the current will be dominated by the 22,000 times bigger C2.
* for steady state it is far from being a short circuit. Thus my anser is: NO, it will not short circuit Neutral and Line.
* to your answer: The capacitor is not related to "direct current". At this node there simply is no direct current. An if there was DC, then the capacitor does "nothing", no current.
* what does " frequency of the communication " mean? Is there any communication via mains? or do you mean "frequency of commutation"?
* " if there is a high-frequency " .. that´s the key point. Not interference frome else where. It´s the diodes that generate high frequency swtiching noise. So the capacitor is meant to attenuate this "high frequency diode switching noise".
Other reasons for a capacitor at this node:
* to slightly increase the transformer output voltage
* to compensate for transformer phase shift (improve cos-phi)
Klaus