The PHP file must be available to the ezlupdate program. The best way is to place a PHP file in your extension (if are you using one), then run ezlupdate with the <i>-e</i> option. http://ez.no/ez_publish/documentation/development/extensions/translation
For example in <i>extension/myextension/classes/i18n.php</i>
The INI entry is related to the display name for the navigation part (for a section) and not the top menu name. The top menu entry itself cannot be translated at this time.