It is a common enough idiom in Britain so that C. S. Lewis, whom you quite, wouldn't have thought twice about using it. One must think of idioms metaphorically, because literally, as you correctly observe, they don't "make sense." If something has some rot, it is partially usable, if it is "all rot," then no part of it is salvageable and it should all be thrown away. In this case, "all rot" means there is not a shred of truth in the statement.

It is a common enough idiom in Britain so that C. S. Lewis, whom you quote, wouldn't have thought twice about using it. One must think of idioms metaphorically, because literally, as you correctly observe, they don't "make sense." If something has some rot, it is partially usable, if it is "all rot," then no part of it is salvageable and it should all be thrown away. In this case, "all rot" means there is not a shred of truth in the statement.