Best Answer - Chosen by Asker
You see, I find that statement to not be true. To avoid circular reasoning, let's just think of anything we usually deem a big fat lie, not that particular quote. We call it a lie, therefore we admit it's not true. By that quote's logic, we could call it ugly too, since it's not true, and therefore not beautiful. That kind of reasoning is wrong; the lie might as well have been very beautiful, by any aesthetic standards.
It also goes the other way round. Haven't you heard of the saying "the ugly truth"? Now, if I told you that you'd find at least 1000 Internet users who might consider you a subhuman dimwit for writing "Keats" with a lowercase "k" and "thank you" in a word, that would probably be true, but indeed not beautiful (not that I agree with such people, God forbid).
I'd say he was trying to sum up some complicated concepts in a short sentence, thus making it reductionist (in the bad sense of the word, that is, if there even is a good one). Maybe it's something about how people should seek truth no matter what, and he was trying to make the idea more attractive by marketing it under the name "beauty".
Truth is beautiful. Truth is beauty because truth is a benediction. Truth cannot be ugly, and the ugly cannot be true; the ugly is illusory.
When you see an ugly person don't be deceived by his ugliness; search a little deeper and you will find a beautiful person hidden there. Don't be deceived by ugliness. Ugliness is in your interpretation. Life is beautiful, truth is beautiful, existence is beautiful -- it knows no ugliness.
And it is lovely, it is feminine and it is holy. But remember, what is meant by 'holy' is not what is ordinarily meant -- as if it is otherworldly, as if it is sacred against the mundane and the profane, no. All is holy. There is nothing which can be called mundane or profane. All is sacred because all is suffused with one.
Keats is saying if you close one eye and look through the wrong end of a telescope with the other it's possible to adopt mawkish sentimentality as truth, then assign the definition to anything you happen to find makes you feel good.