Egyptian leaders aren't really worried about their corrupted military. Egypt is still more powerful than neighboring Libya and Sudan (who both have similar problems, and no American weapons). As for Israel, most Egyptians take it for granted that there is very little likelihood of another war with Israel. As things stand now, the Israelis would still win, as they have so many times before.
So allowing corruption helps buy the loyalty of the military to keep it from being motivated to overthrow the government; doesn't stop the Egyptians from steamrolling over the equally corrupt but far smaller and poorly equipped Libyan and Sudanese militaries; and appears outwardly capable of taking on the Israelis to make their public feel good and justify Egyptian ambitions to lead the Arab world that would never trust that role to a state unable to confront Israel if need be in a war. And the American alliance ultimately is a better guarantee against losing to Israel than their military.
So the Egyptian military can show the numbers and hardware to look good; and tell Libya and Sudan that they can still stomp on them, if they need to.