The Egyptian government has shown a readiness to modernize certain institutions - for example, the judiciary - and is now allowing discussion of liberalizing aspects of political life. It has not, however, shown any intention to democratize, by which I mean giving the Egyptian people the right and ability to change their government. All of the U.S. democracy assistance programs so far, and most under contemplation, aim at modernization and liberalization, which can certainly improve people's lives but do not necessarily lead to democratic transformation. Such transformation could eventually happen when the governing elite decides that it can no longer resist strong internal pressure for change, or as a result of visionary leadership.
It's worth reading all of it, and while you're at it also take a look at her insightful article about the Crawford Bush-Mubarak meeting that took place a few months ago. Many, including myself, were surprised that Bush gave little weight to the topic of reform in the joint statement and press conference the two presidents held. I'm still not entirely convinced by her argument -- I think Bush took it easy on Mubarak because the latter was offering so much in terms of cooperation on Gaza and also hinted at helping out in Iraq.