It doesn't matter where the string came from. Notice he changed Z$1Z (not Perl code) to "Z$1Z" (Perl code). So you'd need to either change the file or add quotes to what you read from the file.

I can't seem to work out the quoting when the string is from elsewhere:

use 5.014000;
use Config::General;

my $conf = new Config::General({replace => 'Z\l$1Z'});

my $string = q/ABC/;
my $search = qr/^(A)/;
say $conf->{config}{replace};
my $replace = q/$conf->{config}{replace}/;
$string =~ s/$search/$replace/gee;
say $string;
[download]

gives:

Z\l$1Z
Z\l$1ZBC
[download]

I've tried all sorts of combinations of quoting and regexp flags but I can't seem to get it to work when $replace isn't explicitly assigned as in your example.

Z\l$1Z is not "Z\l$1Z". Please reread what I wrote.