It quickly became obvious what peace with Egypt meant. No Egyptians visited Israel. No Egyptian trade agreements with Israel. No Israeli businesses opened branches in Egypt, although Israelis seemed to fall over themselves in the first years trying to do the Exodus in reverse, taking holidays over Passover along the Nile. The official government line continued to be anti-Semitic. There were no invitations for Israeli authors to show their works at Egyptian book fairs, and so on. With the exception of certain tourist sites along the coasts, and the highways, the Sinai became a virtual no-man's land again.
Then, in 1985, there was the Ras Burqa incident, which shocked Israelis. According to Wikipedia,
On October 5, 1985, an Egyptian soldier, Sulayman
Khatir, machine-gunned a group of Israelis, killing three adults
and four young children, on the dunes of Ras Burqa. 
The only survivor was 5-year old Tali Griffel, whose mother, Anita, shielded her
with her body.
According to eye witnesses, the Egyptian Central Security
Forces who were nearby refused to help the wounded; furthermore,
they stopped an Israeli doctor and other tourists at gunpoint from administering
any aid to the victims of the shooting, and the wounded Israelis were left to
bleed to death.
Egyptian authorities countered that the Israelis bled to death "because this
crazy soldier refused to let anyone near the area that some of the victims
The gunman killed one of the Egyptian policeman who tried to arrest him."
Israel protested the Egyptian refusal to allow the victims to be treated by
Israeli doctors or transferred to hospitals in Israel.
said the killings were not intentional. He said he could only see a group of
people coming towards him in the dark, refusing his orders to stop.
Seven people were killed in the attack: Anita Griffel, a Canadian-born
sociologist at Hebrew
University of Jerusalem; Hamman Shelach, an Israeli judge, his wife
Ilana and their daughter, Tzlil; Amir Baum, Dina Bari and Ofri Turel. The
Shelachs' oldest son, Oz Shelach, was not with them, and is the only surviving
Shelach was the son of Israeli poet Yonatan
Ratosh, founder of the Canaanite movement.
After the shootings, Egyptian authorities claimed that the perpetrator
Sulayman Khatir was mentally ill.
During the initial interrogations, Khatir claimed that he had been unaware of
the identity or nationality of the people he had shot and that they had made no
offense or provocation toward him. The only reason why he had opened fire was
that, as Khatir said, they had trespassed on a prohibited territory.
He was tried by a closed military tribunal and on December 28, 1985 sentenced to
life in prison at hard labor. Ten days later, on January 8, 1986, Khatir was
found dead in his prison hospital room hanging by a strip torn from a sheet of
plastic. The authorities declared his death a suicide.Opposition
parties in Egypt claimed that he had been murdered. 
Egyptian opposition politicians hailed Khatir as "hero of Sinai"
for committing the massacre of Israelis.
The glorification of Khatir as a national hero in the Egyptian opposition press
was echoed in other Arab countries, and
mass demonstrations were held in his support. Attempting to justify his actions,
the press did not report that all but one of the victims were women or children,
but instead invented miscellaneous pretexts for the shootings. The press claimed
that the Israeli tourists were spies caught photographing secret military
installations, that they spat upon and tore up an Egyptian flag, that half-naked
Israeli women offended Khatir's Muslim conscience, or
that the tourists attacked him. The pro-governmental press remained silent
regarding the facts of the massacre, leaving the claims unchallenged. Many
Egyptian intellectuals and religious leaders joined in extolling Khatir and his
act. Umar al-Tilimsani, the leader of Muslim
Brotherhood, said that "if every Muslim would do what Sulayman did,
Israel would no longer exist". Farid Abd al-Karim, one of the leaders of the Arab Socialist
Party, called Khatir "the conscience of this nation", whose bullets
"washed away the shame" of the Camp David Peace
Accords between Israel and Egypt. Ahmad Nasir of the Egyptian Bar
Association claimed that history would always honor Khatir as "a living model of
a noble Egyptian who refused to be led astray by the treaties of betrayal and
surrender". [The numbers refer to footnotes documenting sources in the original article]
Today, due to as-yet-undetermined circumstances, two Israeli buses were attacked just outside of Eilat, not in the Sinai but where Israel comes to a "point" at the Red Sea. The country is only a couple of kilometers wide there, tapering toward the port, so it is easy to infiltrate, either from Egypt or Jordan. The current supposition, as I write this, is that the terrorists are Hamasniks from Gaza who crossed into the Sinai via the laxly controlled border with Egypt, rather than Egyptian soldiers or Egyptian terrorists based in the Sinai. But the gas pipeline has been sabotaged 4 times in the past months, since Mubarak's government has been overthrown, and there are definitely voices in Egypt calling for an end to the peace treaty with Israel, just as I predicted 33 years ago.
On this issue, I'd rather not be right, but I think there is little if any room for optimism.