The quote has gone beyond being just a quote. It's a popular expression now and I love the play of words involved. Many great authors have coined some beautiful expressions and Shakespeare for one, takes credit for the most: salad days, one fell swoop, in one's heart of heart..........am sure there must be others by GB Shaw, Kipling, Dickens, Saki, Lewis Carroll and a detailed research will not go in vain. I shall embark on that journey once I have more time on hands :)
The expression, "Denial ain't just a river in Egypt." uses the similarity between the way the name of the river, "The Nile" and the therapeutic term "denial" sound when spoken. It is a humorous way of saying that some one refuses to see what is obvious to every one else, usually as a way of protecting himself from the pain the truth would cause.
An example of the use of expression as I found it on http://www.phrases.org.uk/
"Junior weighs as much as a grown man even though he is only ten. He has second and third helpings at meals. In between meals he snacks on chocolate bars and cake. His mother insists he isn't fat; he just has big bones."
"Ha! She is living proof that denial ain't just a river in Egypt."Source: http://www.phrases.org.uk/