The problem is, while the Sinai is sparsely populated, the Suez canal is where the major population zone of Egypt begins. Annex the Suez and enough land on the western bank of it to secure it (say 10 miles), and you gain over a million more Muslims (going off and educated guess here). Combine that with the harsh international reaction that would come from an action like this, and it seems like its much more trouble then it is worth for Israel.
Agreed. Although, seeing Israel's previous behavior, might have simply expelled those Arabs and called it retribution for the Arab Jews expelled from Egypt post-1948.
That being said, it would be basically impossible for Israel to hold that much territory long-term. It would require massive garrisons on both its Syrian and Egyptian borders, which would logistically stretch the IDF far too much. Unless Israel got creative with the Palestinians (made them citizens, or ethnically cleansed them from the West Bank into an Israeli client state of Palestine, set up in the territory of Jordan), they would be far too stretch in numbers to hold that territory.
As well, during the Suez Crisis, the Soviets threatened that if the Anglo-Franco-Israeli coalition didn't leave Egypt, nuclear weapons would be used. So the USA made them leave. Israel would NEVER be allowed to hold onto the canal with the Brits and French, let alone by themselves. This is ASB.