Wikileaks recently confirmed what many have long suspected about the Egyptian armed forces. Namely, that the organization is rotten with corruption and inefficiency. Worse, the problem goes back decades and keeps getting worse.
No army likes to admit that it has problems, but in Egypt, the government's denial of corruption and nepotism within the army caused these problems to grow to epidemic proportions. Worse, the government jails anyone who speaks out about military incompetence. For example, last year a 20-year old engineering student was imprisoned after writing an article on his blog claiming that favoritism and corruption were rampant within the country's armed forces. Specifically, the student wrote a post claiming corruption within Egypt's military academy.
Imprisoning people for criticizing the government is nothing new in the Middle East, but usually such people are jailed for speaking out about human rights abuses or lack of press freedoms. In Egypt, however, it's essentially a crime to highlight or write about serious problems in the military, problems that could be fixed, such as corrupt officers or poor training standards.
Egypt has several positive things going for its military. In terms of manpower, Egypt is the most militarily powerful country in the Arab world, with a standing army of around 350,000 officers and men. In addition, friendly relations with the US and a massive military aid agreement have ensured that, unlike Syria and Libya who still make do with an arsenal of aging Soviet gear, the Egyptians have access to some of the most sophisticated, state of the art weaponry available.
Unfortunately, Egypt's military also suffers from the same problems that are endemic throughout the entire Egyptian government, namely corruption, incompetence, nepotism, and low salaries. These problems persist largely due to the Emergency Law, that has been in force since President Anwar Sadat's assassination in 1981, giving the government power to do pretty much whatever it wants. Dictatorships and "emergency rule" are pretty common in the Middle East, but the Egyptian Emergency Law makes it a crime to "insult the armed forces" or "tarnish the image of Egypt". In other words, it's illegal to point out legitimate problems within the Egyptian military because the government fears it will make the country look bad.
Since journalists, and even other officers, are basically forbidden by law to raise these issues, they never get fixed or addressed. The Egyptian government is determined to protect its image as having a model military, at the expense of allowing greedy and incompetent officers to occupy important posts. Most countries that conduct joint military training with the Egyptians are aware of these issues, and aware that the Egyptian government is in denial about them, so there's really no point in the government continuing to jail people for writing about them. All it does is continue to damage Egypt's reputation and allow it's military's problems to fester.
Egyptian leaders aren't really worried about their corrupted military. Egypt is still more powerful than neighboring Libya and Sudan (who both have similar problems, and no American weapons). As for Israel, most Egyptians take it for granted that there is very little likelihood of another war with Israel. As things stand now, the Israelis would still win, as they have so many times before. This is not something Egyptians like to talk about, but it's something everyone just understands. Just like it's assumed that Egyptian troops would roll over their Libyan or Sudanese counterparts.