Holy city relocation doesn't work, at least never has for me.
With holy city relocation off, it won't be relocated when its purged during a inquisition, it will just cease to exist.
Same as if the city was raised.
Note : As I understand it, if another civilization, has 2 or more cities with the religion to be purged/city to be raised, they holy city will relocate, when holy city relocation option is enabled. Without limited religions being enabled.
With Limited religions, it would only go to a civ, that HASN'T a Holy city, and has 2 cities with that purged religion.
I play with holy city relocation, but have never experience this. 45 Deg, has noted, that it works in Realism Invicitus.