There IS a recycling centre in Dahab. They collect plastic bottles, cans and paper and crush it into bales. These are then taken, I think, to Nuweiba, where they can be sold.
I take my domestic stuff down there. If you're interested check it out: it's on the way into Laguna at the back of the big piece of undeveloped land that sits just south of the Black Prince.
In the UK most of the recycling starts by seperating at source, i.e. people sorting their own stuff out before it's collected. Taking bottles, cans and paper out of the rubbish equation would surely reduce the amount of trash in town by half at least...