Fluorescence, excitation and fluorescence depletion spectra of the lowest Rydberg states of NO trapped in H-2 matrices are reported. The absorption bands are shifted by about 0.58 eV to the blue of the gas phase energy. They are strongly broadened and exhibit an asymmetry by a blue wing. The fluorescence bands are significantly narrower, with a red wing, and lie very close to the gas phase energy. The absorption lineshape can be accounted for by the large extension of the ground state wavefunction, due to the strong contribution of the zero point motion in the H-2 lattice. The absorption-emission Stokes shift is interpreted in terms of 'bubble' formation around the Rydberg excited molecule. A moment analysis of the absorption and emission bands in the harmonic approximation shows that most of the absorption-emission Stokes shift is used up as energy to create the 'bubble' around the excited molecule. The fluorescence depletion spectrum yields Rydberg-Rydberg transitions very close to the gas phase energy. This, together with the fluorescence spectra, indicates that the molecule is in a quasi-free, gas-phase-like state in the expanded cage. The excitation spectra and the fluorescence depletion spectra indicate a severe compression of the Rydberg series of NO in H-2 matrices, which can be accounted for by a large negative electron affinity of solid H-2. Concerning the intramolecular energy relaxation in NO, it is found that the Rydberg<->valence relaxation processes follow much the same pattern as observed in rare gas matrices for the lower valence states. For the higher valence states, a photochemical route is suggested. For the vibrational relaxation by Delta upsilon = 2 in the A state and for the C-A electronic relaxation, intermolecular energy transfer processes between NO molecules are invoked, which occur in the sub-ns timescale.