I have been coming to Dahab at least once or twice a year for a few years now, and while it is changing (not for the better in my opinion), I think it's still a very unique place.
It's laid back and friendly with a minimum amount of hassle compared to the rest of Egypt, it's very cheap and the scenery of the Sinai is stunning if you feel like spending a day out of the water. A day trip to the Coloured and White Canyons is amazing, as is a night out in the desert, or simply chilling out in one of the quieter waterfront restaurants with a sheesha (waterpipe, not talking illegal substances here) in the evening after a day diving.
I have done loads of dives there and I still manage to find "new" sites or dive the same sites again in a slightly different manner (direction, depth, day or night). The marine life may not be as great for big stuff as other places, but there is plenty of reasonably healthy reef with a variety of life.
There must be about 30 or more dive centres in town and only very few have a dodgy reputation now, most are well run and safe. That used to be different, apparently. Just take your pick when you get there. I have always dived with Fantasea Divers and they are great, but so are others.
The most (in)famous dive site in Dahab is the Blue Hole, where every year divers die, but there is absolutely no reason why anyone with some sense should die there - it's simply people diving too deep, trying to prove something, namely that they can find the passage way to the outer reef at 60+m. Many do, but some don't. The dive that is usually referred to as the Blue Hole dive, however, is in fact a wall dive from a place called The Bells, finishing in the Blue Hole, and is one of the great dives and nothing to worry about if you can resist the deep blue of a bottomless dive...
The Canyon is another famous dive, if you get the chance - do a night dive there, it's incredible, but not often done. One of the advantages of being a regular is that I can put in requests... Other great sites are The Islands and loads more!
Anything else you would like to know?