Two of the detainees are thought to be computer engineers who arrived in the Red Sea tourist resort from Cairo the day before three nearly simultaneous blasts ripped through the town.
State-owned newspapers blamed the attacks which have remained unclaimed on a group called Tawhid wal Jihad.
The same organisation is accused by the government of carrying out the deadly attacks in Sharm el-Sheikh in July 2005 and those further up the Red Sea coast in October 2004.
The wounded Australians, a 27-year-old woman from New South Wales and a 36-year-old woman from Melbourne, have been evacuated by the Egyptian air force to Cairo suffering face and body cuts.
A third Australian's suffered severe shock in the attack.
Original estimates put the death toll at 23, but that figure has since been revised down to 18.
Four foreigners have been confirmed to be among the dead: a ten-year-old German boy, a Russian, a Swiss man and a Lebanese national, although the Lebanese authorities said they knew of no nationals killed.
Bedouin suspects
As well as those formally detained, police said about 70 local Bedouin had been pulled in for questioning.
Security officials said the bombs were primitive and looked home-made.
"These were bombs that contained gunpowder and nails and were fitted with timers," said one official.
They played down possible links to external militant groups such as al-Qaeda but say they may serve as inspiration for the local attackers, who are believed to be drawn from disaffected Bedouin in the Sinai.
Egyptian authorities say the Sinai group was founded by a man of Palestinian origin who grew up in the north Sinai town of El Arish and adopted the views of militant Islamists.
They say the group has no known links with foreign organisations such as Osama bin Laden's al-Qaeda network.
The alleged founder, Iyad Said Saleh, died in the bombing at the Taba Hilton, apparently because he set the timer of his bomb wrongly, Egyptian police said at the time.
Bedouin working in tourism in the Sinai have expressed concern that fingers would be pointed at them over the attack.
"Bedouin are not all good," said Saleh Hussein, a northern Bedouin who works in Dahab.
"But Bedouin are the ones who live here, so normally if something happens (the authorities) will blame whoever is around."
Carnage for holidaymakers
One witness to the bombings, Australian Steve Torokfalvy, said he administered first aid to victims after one explosion smashed windows and blew out doors in his hotel.
"There was one guy who was in a really bad way. When we turned him round I saw half his face was missing," said Mr Torokfalvy. "From the top of the hotel you could see body parts on the roofs of the shops ... It was really horrible."
Despite the severity of the attack, which left body parts scattered on the tops of nearby buildings, many tourists said they planned to stay on in Dahab.
"We don't think we're going to change our plans. You end up thinking that it could happen anywhere these days," said Swiss holidaymaker Matthias Barlocher.
"(But) it doesn't feel right to be enjoying a holiday when you can see bloody footprints everywhere."
Analysts say that the bombings threaten to dent Egypt's vital tourist industry, which brings in more than $A9.38 billion a year and employs around 10 percent of the country's workforce.
However, despite the carnage, Europe's two largest tourism firms, TUI and Thomas Cook, said just four customers wanted to cut short their holidays in the region.
Speaking on Egyptian television shortly after the latest bombings, commentator Wahid Abdel Meguid argued that the series of attacks since 2004 were timed to coincide with key dates in the history of Egypt and the region.
"The choice of important dates in the Arab-Israeli conflict is intentional," he said.