When my recall is up, I will need 2 yrs and 10 months to get to 20. If, BIG IF, I somehow get a one year extension which puts me over 18yrs, do you think the AF will honor sanctuary?
The AF has to honor Sanctuary. It's spelled out in AFI 36-2131 that you cannot be involuntarily discharged once you're past 18 (with certain obvious exceptions). Recommended reading for anyone affected.
How do you "invoke" sanctuary? Is there paperwork involved ...
Actually, there's no paperwork "required." However, you might want to take action to avoid administrative errors (unless you trust AFPC implicitly). Once you're past your 18 years, email the Recall office at AFPC "reminding" them that you've reached Sanctuary. They'll cut an amendment to your EAD orders to extend your DOS to 20 years TAFMS. Do NOT expect to be able to serve past 20. Due to the ongoing overmanning of the AF, it's really tough for them to justify extending your Sanctuary any further than required by reg.
... or would a one year extension be a 'de facto' 3 year extension to 20?
Yep, it would. Which may induce them to deny the extension. Not to screw you personally, but because the AFI requires them to account for extensions and duty that would put someone into Sanctuary. It would unfortunately just be the appropriate, fiscally responsible thing to do. Sorry.
If, OTOH, you're in one of the critically manned career fields, they'll likely gladly extend you that 1 year, knowing that they'll really get to keep you for 3.