They are both correct.
1 means "I can't explain this very well." 'Really' modifies 'explain'.
2 means "I definitely can't explain this." 'Really' modifies/intensifies 'can't'.
3. "Really, I can't explain this." or "I can't explain this, really!"
-- "Believe me. I can't explain this. Stop asking me to."
And in my opinion, REALLY has evolved to become a sentence expander and even just an expression. People use it with an increasing frequency. "I really think that people just really use it to not really mean anything. Really."