I know this might be too late for you, but just in case someone stumbles upon this topic via google or if you're still looking for the solution i'll answer.

The codecs do not belong in the recalbox.conf but rather the config.txt in boot folder.
To access it (I used ssh and i guess that's the easiest way) you'll need to make it writable first, as in it's default state it is read-only.
So ssh into the recalbox and type: mount -o remount, rw /boot

The file you want to edit is /boot/config.txt
Just use Nano to edit it ( nano /boot/config.txt) go to the end of the file and write:

decode_WVC1=0x12345678 (obviously changing 0x12345678 for your actual vc1 key)

if you also like to install mpeg2 support add another line like this:

decode_MPG2=0x12345678 (again, using an actual mpeg2 key instead of 0x12345678)

then press ctrl+x to close the file, the system will ask you if you want to save the changes, confirm with y.
Now you'll have to restart your recalbox and the codecs should work, at least for me it did.

Hope this will help someone someday

[if you should be new to the raspberry and ssh in general, just very quick: you can use ssh software (like the free program putty) to connect to the recalbox using another pc in the same network. just start the program, default host name is "recalbox", use "root" as user and "recalboxroot" as password (and dont worry about the pwd not showing, just type and press enter). you're now presented with a console in which you can use aforementioned commands.]