An old phrase which reentered popular culture in the early 90s after being used in The Simpsons by the character Ned Flanders. It subsequently became a minor catch phrase of his, used in some Simpsons merchandise.
It means exactly what it says (the "say we did" part may or may not be sarcastic) but is often said in a patronizing tone or otherwise as a witty remark in a variety of situations.
Girlfriend: Hey we should go ballroom dancing sometime it looks like fun!
Bloke: Uh let's not and say we did...
Pissed Dude (Getting Carried Away): Huh that 60 year old barmaid looks like such a slut. I bet you could pull her. Infact I bet we could be fucking her from both ends at the same time before the night's out haha, that's how much of a desperate slut she is.
Other Guy: Haha yea but let's not and say we did!
Pissed Dude: Hah damn right
Taken from the cartoon Ed, Edd and Eddy. Let's not and say we did, is a way of saying NO! to someone. Usually, the person's first name will be added to the end of the sentence.
*ed has just swallowed the video camera and Edd had retrieved it from his stomach*
Ed: I can't wait to see that on video double d.
Edd: let's not and say we did ed!
Steve: hey tom let's go and dive into that bucket of cement.
Tom: Let's not and say we did Steve!