Mubarak recognized that he couldn't win a war against Israel. While I suppose he deserves a little bit of credit for being rational enough to know that, it's hardly a great accomplishment in itself. And putting aside the specifics of the Israel-Egypt peace treaty, are all peace agreements inherently in the interests of the people of that nation? Although I don't think the Egyptian people have any desire to go to war with Israel, they also don't have the desire to be as supportive of Israel as Mubarak was. As a dictator, Mubarak was not representative of the wishes of his people.
President Mubarak didn't need to go to war with Israel. He could merely have taken the easy path and rescinded the treaty, leaving open the possibility of war at some point in the future and preserving ties to the Arab world. He didn't. He could have taken the minimalist approach and merely honored the treaty in a technical sense. Instead, he played an active and persistent role in trying to mediate a larger peace agreement between Israel and the other Arab states. Moreover, even as he honored the treaty and pushed for peace, he also patiently rebuilt Egypt's relationships with the rest of the Arab world. Those relationships had been severed upon Egypt's agreeing to peace with Israel.
Without doubt, he was an authoritarian leader. He was not necessarily representative of his people. Nonetheless, his record is not all bad. On the peace front, I would suggest that his record is quite exemplary.
"Regional stability" is merely an obsession of the United States (which makes sense, since the Arab states tended to support American power). As the recent revolts have made clear, the Arab people do not place such a high premium on regional stability.
Regional stability is not just an American obsession. Given that Europe depends on the Mideast for an even larger share of its oil, regional stability is at least as much a European goal as it is an American one. Regional stability, of course, does not mean adherence to a rigid status quo. Instead, it allows for change, but at a pace where things don't deteriorate to the point where widespread violence erupts. A gradual but steady shift toward democratization would be fully incompatible with the goal of regional stability.
Radicalism is CAUSED by stagnant political systems and economic poverty...problems which Mubarak has made worse.
Myriad factors are involved. Economic stagnation, wealth disparities, a large underemployed youthful population, a quasi-religious reawakening led by fundamentalists who blame a drift away from Islam for the region's problems and want to turn back the clock to a more stringent interpretation of religion and greater role of religion in society, a disproportionately small role for women in society, historic rivalries (ethnic, tribal, and religious), actual and perceived grievances, stunted institutions, etc.
Clearly, President Mubarak was not able to lead Egypt in a fashion that allowed Egypt to avoid growing discontent. He was not able to accommodate the desires among Egypt's people for a larger voice and meaningful political choices. However, in that respect, he was quite similar to many of the other Arab rulers. Such systems are no accident. The absence of liberal Western-style democratic systems in the Arab world is not coincidence. The current systems reflect the institutional development, historic experience, cultural traditions, etc., in those states.
And what aspect of American foreign policy in the Middle East would lead you to the conclusion that being "a reliable ally of the United States" is inherently a good thing? I'm glad he wasn't our enemy, but his people's interests would have been better served if he had ACTED in the people's interests. And sometimes that will entail people electing people that the US government doesn't like.
As an American, President Mubarak's being a reliable ally counts for something. Moreover, I recognize that American interests and the desires of Egypt's people might not always be compatible, but that's entirely a different issue.