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In Bush's mind, it may not be a lie at all, because he may have been told by his "trusted advisers" that Saddam refused to allow the inspectors in.
Cheney/Wolfowitz/etc. could have easily fed this to the President. He would believe that this was true since he never reads the newspapers or hears opposing views. And this would make his resolve even more "steely" since it makes an excellent justification, whether or not it is actually true.
As long as it fits his simple world-view...