I do think that Rumple knew he was lying to his son; it’s in his hesitancy when 14yo Bae asks about her (again?). He’d seen Milah laughing with Hook at the tavern and he knew she was unhappy with him. He was always a smart man, if a little gullible. He might have preferred to believe that she was dead instead of happily pirating with Hook, but on some level he knew better.
So yes, I hold that he did lie to Bae, just as Emma lied to Henry about his father–to protect him, and to protect himself.
Keeper of Belle's Gold magic, sand dollar, cloaks, purple FTL outfit, spell scroll, library key, copy of Romeo and Juliet, and cry-muffling pillow, Rumple's doll, overcoat, and strength, and The Timeline. My spreadsheet: https://drive.google.com/file/d/0B6r8CySCCWd9R0RUNm4xR3RhMEU/view?usp=sharing