Yes, here's the definition of denial in psychiatry: "denial /de·ni·al/ (dĭ-ni´il) in psychiatry, a defense mechanism in which the existence of unpleasant internal or external realities is kept out of conscious awareness."
We all need our defense mechanisms. Otherwise, we enter the battlefield totally defenseless. And unfortunately, that means we will be chewed up and left for dead. It's just the way of the world.
Now I think you can play a double game. You can know of the existence of unpleasant internal or external realities, you can be conscious of them, but you can also pretend to not be conscious of them. If you are a good pretender this could work. So in this case you'd know, but pretend not to know these unpleasantries.
You would know, but you'd be pretending not to know. And to others it might appear that you don't know. They wouldn't know you were pretending. And they might actually help you pull off your own ruse. They would unknowingly help you in your deep denial. Unless of course, they were pretending they didn't know you were pretending. And then it would all depend upon whether they were good or bad pretenders.
Your pretending would be contingent upon their pretending. A sort of precarious position.
You could also probably play a triple game: knowing these deep internal and external realities, but pretending to pretend that you are pretending. And maybe you don't stop there. You could take this pretending business to the outer limit, and your brain would get so full of all these pretending scenarios, you'd just kind of crowd out any and all unpleasantry that could possibly bubble up.
That's a lot of unpleasantry and a lot of crowding out! Basically your brain would become a raging ball of confusion. But it could be a happy confusion. And you could pretend that that's a good thing! No, a great thing! Denial!