Hello! Please remember that my response is for information only, we are not establishing a therapeutic relationship.
I think your intuition is correct, that the incident is too painful for your sister-in-law to accept, so she denies it.
My primary concern would be for how this incident still affects your daughter. You didn't say how much it affects her, or in what way. She may be a good candidate for EMDR (www.emdr.com), which is a therapeutic technique that helps people to process unresolved traumatic events so that the memory is less intrusive/bothersome.
As far as your sister-in-law goes, that is very personal decision if you, your husband, or your daughter wish to try to address it again. I do not believe that it is too "late," but you do need to be prepared to receive the same exact reaction from her if you do talk about it again.
It is an issue that affects each of you, so I could make an argument for each of you to be the one to discuss it with her, and each of you would probably have slightly different reasons for wanting some resolution.
I would recommend that your daughter address the trauma with a therapist before considering talking to her Aunt. She would come from a different place emotionally if she does this, and at that point she may not "need" anything from the Aunt (like validation). It also might help if she were to be rejected again.
Please feel free to follow up.