Voltage dropping capacitor doesn't drop the voltage?
The capacitor will form a voltage divider with the impedance it's feeding. If that impedance is solely that of your meter, which is very high, then the resulting voltage drop will be very small.
Once loaded with the output load, there will be a significant voltage drop.
Be warned that if your load consists of a bridge rectifier, then a reservoir capacitor, then a DC load, that the rectifier and reservoir cap must be rated for full mains voltage. If the DC load ever gets removed or fails open, then the series capacitor will no longer drop your design voltage, and the reservoir cap will charge up to full peak mains voltage, 340 V in 240 V rms land.