Strategy Page lists some of the many difficulties facing Egypt:

Although deposed dictator Mubarak officially maintained the 1979 peace treaty with Israel, Mubarak also had the state controlled media constantly criticize Israel for real and (mostly) imagined crimes against Moslems. Mubarak allowed Hamas to bring in Iranian weapons and cash (for an eventual attack on Israel). Mubarak did what any dictator does, he found an external enemy to blame things on. But all of Egypt’s problems are internal, mostly in the form of corrupt government officials and most of the economy controlled by a few hundred families. It’s as the Russian czar said once, when asked about his great power, “I do not run Russia, 10,000 clerks do.” It’s the same in Egypt (or any other country). Replacing enough of the several hundred thousand officials (government and business), to really be in power, will be difficult for any reform politicians. Replacing all the current “clerks” with honest ones will be impossible. Eliminating corruption takes a generation or more, assuming you really try. There are centuries of history with that sort of thing, but Arabs tend to consult their own special history book, one found in the fiction section, and full of tales of imaginary Arab accomplishments, and a long list of self-inflicted injuries blamed on others. The fact is that Egypt, like most Arab nations, has long neglected education and economic opportunity. Literacy is only 71 percent, and corrupt officials make it impossible to start a legal business. Economic activity is monopolized by the several hundred families who see nothing wrong with crippling the economy for their own gain. The wealthy have not hesitated to use thugs and death squads to maintain their power. While often at each other’s throats over business or personal matters, the several hundred thousand officials and business leaders will largely unite at any attempts to dismantle their economic arrangements. Bribes, threats and all sorts of enticements will be offered cripple the reform efforts. While most Egyptians demand reform, those benefitting from the current arrangements know that they have thousands of years of Egyptian history on their side. Occasionally, foreigners would take advantage of this culture of corruption, which extended to the army, and invade. But the Egyptian ruling class would soon absorb the invaders, and the business of running Egypt would return to its normal ways.

Israel knows well how corrupt the Egyptian armed forces are. Except for a few years before the 1973 war, when a highly efficient Anwar Sadat was running the army, the Egyptian armed forces have been allowed to wallow in their usual incompetent self-delusion. Peacetime armies have long been seen as perfect sources of wealth for corrupt politicians. Thus, in the last three decades, the Egyptian forces have done their job in this department. A new Egyptian government, seeking to gain domestic and foreign popularity by cancelling the peace treaty with Israel, would restore the threat of Egypt foolishly starting another war they would lose. Israel would have to redeploy its forces to deal with this. That would cost money, and weaken the edge Israel has in the north against Hezbollah and Syria. All this would not really change the balance of power. What might do that is reforms in the Egyptian military, to eliminate corruption and raise standards. Good luck with that.

Egypt may achieve reform, to include a sharp reduction in corruption and true rule of law. What is less certain is dealing with the effects of three decades of anti-Israeli and anti-Semitic propaganda in the state controlled media. But the biggest problems are internal, and solving those are a long shot.

Many Egyptians have doubts that democracy will work in Egypt. They point to Lebanon and Iraq as examples of what happens when you allow Arabs to use democracy to rule themselves. The 22 year old Lebanese democracy fell apart in 1975, followed by fifteen years of civil war, then a peace deal that left the country divided into the “democratic” north, with the south ruled by a Shia religious dictatorship (Hezbollah) financed by Iran. Iraq has a barely functioning democracy that many Arabs despise because it was facilitated by an American/British invasion to remove an Arab dictator. What Arabs really find discouraging about Iraq’s democracy is that it reveals how difficult it is to run such a government. But as Westerners constantly point out, freedom isn’t free and democracy isn’t easy. If you want the goodies, you have to make the effort.

Update: Lawrence Solomon thinks that the path to democracy is even harder, and less likely to succeed:

In Egypt, the ends that democracy would bring are more likely death, submission and the pursuit of jihad, as defined by the country’s Muslim Brotherhood. “The Koran is our constitution, the Jihad is our way, and the Death for Allah is our most exalted wish,” it proclaims. The word Islam does mean “submission.”

Most Egyptians — three-quarters of its overwhelmingly Muslim population, public opinion polls say — want “strict imposition of Sharia law” and a larger proportion wants policies that most in the West would view as human rights abuses — 82% would stone adulterers and 84% want the death penalty for Muslims who leave their faith.

While most of the urban generation in Cairo’s Tahrir Square desires a modern Egyptian state of some kind, the Egyptian majority does not: 91% of Muslims want to keep “Western values out of Islamic countries.” For the vast majority outside the main cities, the outrages perpetrated by Mubarak lie mostly in his suppression of Islamic fundamentalist values, such as his ban on female genital mutilation and his moves to phase out polygamy and child brides. Most Muslim Egyptians not only oppose a modern Egyptian state, they would dismantle the existing Egyptian state, two-thirds wanting instead “to unify all Islamic countries into a single Islamic state or caliphate.”

But even with all of that said, he points out that things are not totally hopeless:

But traditional Egypt need not forever prevail. A poll just released by the Washington Institute for Near East Policy, taken between Feb. 5 and Feb. 8 of residents of Cairo and Alexandria, the two centres of protest, shows both how different the major cities are from the rest of the country, and how much hope there is for a modern Egypt in the future.

The protest was mostly driven by the economy, with 37% citing either “poor economic conditions” or “Unemployment/Job conditions.” Corruption came in next, at 22%, followed by “poor delivery of services like electricity and water” at 5%. The social causes touted by the Western media were all but non-existent: Just 3% cited “political repression/no democracy” and another 3% cited “abuses by security services/arrests/torture etc.” Neither are the populations in these urban centres motivated by fundamentalism. Only 4% complained of a “Regime not Islamic enough,” only 4% of a “Regime Too Connected to the U.S.,” and just 3% of a “Regime Too Supportive of Israel.” In a hypothetical election for president, one-third of the residents of these cities favoured either Mubarak (16%) or his vice-president, Omar Suleiman (17%), compared to 26% for Amr Musa, a prominent diplomat.

Mohammed ElBaradei, a diplomat endorsed by the Muslim Brotherhood, would receive just 3% of the vote.