Aswan and its impressive dam are at the limits of the short-haul package holiday. But don't let that hold you back, says Simon Calder

His teeth sparkled in the sun as he gave a cheery wave and drove off, leaving us at the visitors' enclave in the middle of the High Dam, above the Egyptian city of Aswan. Splendid taxi driver, I thought. After we had enjoyed the views and cursory historical descriptions at the site, I invited the family to start ambling along the path to the western end of the structure that holds back Africa's greatest river. But then an equally cheery chap – this one wearing a uniform and carrying a semi-automatic weapon – indicated that his job description was precisely to stop us walking along the dam.

This being Egypt, a country riven by appalling acts of terrorism, you could see his point. Damn.

Yet being Egypt, a solution soon arrived, in the shape of a bus carrying a school trip from Luxor. The driver stopped and offered us a ride to safety, or at least to the viewing area beneath the dam where the immensity of the barrage built by the Soviet Union is most apparent. To move on from here, we ignored the current Foreign Office advice and hitched a ride in the back of a pick-up truck, transitting the mightiest structure on the continent while enjoying a view as wide as the African sky.

To the south, a trickle of islands faded into a Saharan heat haze; to the north, the inland ocean of Lake Nasser that the dam created shimmered towards an invisible line somewhere around the horizon: the Tropic of Cancer, only 30 miles to the south.

All of which comprised an exotic morning jaunt, considering we were on a short-haul New Year package holiday. This winter, Britain's biggest tour operator, Thomson, has decided to test the appeal of Aswan. With a 2,500-mile journey from Gatwick, the holiday constitutes the outer limits of the short-haul package. And the city itself is a place of extremes: meteorologically, there has been no measurable rainfall for five years; and ethnically, this is where the Egyptians clustered along the banks of the Nile give way to the darker-skinned Nubians.

Back in Aswan, which sprawls across the mother river and a scattering of islands, you can wander freely through Nubian villages – a patchwork of pastel-painted houses, built from mud-bricks in the half-century since work on the dam began.

The Nubian people used to live on the banks of the Nile between Aswan and the border with Sudan, sharing shoreline space with magnificent temples bequeathed by the ancients. In 1960 the need to control floods downstream trumped culture and community. From the back of a 21st-century pick-up truck, the High Dam looks to have sterilised, not fertilised: with nothing but empty desert and still water upstream, the project looks like environmental and cultural vandalism. On one of the many ferries that shuttle across the Nile downstream from the dam, I met Zain – a Nubian who now runs an inbound tour operation. "We can't forget our homeland," he told me. But like his compatriots, he accepts that life in Aswan is as it is. And, for anyone fortunate enough to be a holidaymaker here, life is good.

The top hotel is the Old Cataract. Agatha Christie conjured up Death on the Nile here, but a restoration project seems to have been going on since Poirot was a lad. With that out of the running, two big, modern hotels – each on its own island in mid-Nile – vie for your business. The cheaper is the Pyramisa Isis, where we stayed. Tries hard, but could do better, we concluded: a certain scruffiness and inconsistent service belied the five stars sparkling behind reception.

The superior of the two is the Swiss-run Mövenpick, apparently built out of giant Lego bricks and topped by an absurd tower. From the 13th-floor summit you can survey the Aswan ensemble, and plan your days. It's not exactly Luxor – the city downriver saturated in archeological glories – but there's more than enough for a week.

The west bank of the Nile is barely populated, at least by the living. You can scramble up to the rock-cut Tombs of the Nobles that have protected the dead for millennia. Archaeologists' penchant for over-restoration means some of the magic is missing, but with no other tourists around you can hear the faint echoes of the past. Along the bank, the Aga Khan mausoleum (off limits to visitors) holds the tomb of a 20th-century noble who became besotted with Aswan.

Your boatman needs you, to keep him and his family financially afloat. So pay the quivalent of a fiver for a water-taxi ride to Lord Kitchener's island – an exuberant botanical garden planted by the soon-to-be War Secretary while he was Consul-General in Egypt.

One energising aspect of the Upper Nile is that the dry air of mid-Sahara means you never sweat. But in the absence of rain clouds, the flora springing from seeds imported from elsewhere in the British Empire and planted on the island provides a welcome, shady canopy while you wait for the afternoon breeze to pick up.

Of all the isles, Elephantine Island – the one with the Mövenpick on board – is easily the most intriguing. Once you work out how to escape from the back gate of the resort, you find yourself at Baaba Dool: a Nubian house serving tea and serenity in a series of cool, carpeted chambers, and amusing nippers with a pet baby crocodile.

I was more amazed to find, at the top end of the island, not one but two "Nilometers" – ancient stones carved with calibrations that informed the country how benevolent the river would be, with implications for the coming harvests, and allowed the rulers to set taxes accordingly; imagine VAT being set according to a depth gauge on the Thames side of the Houses of Parliament and you get the idea. Close by, Nubian fishermen untangled the hooks attached to their lines while an open fire was coaxed into life to roast a perch.

This window on Egyptian life is best contrasted with another: the souk, which does more than just hook unsuspecting tourists. The name Aswan, it is said, derives from the ancient term for trade. Elsewhere in the country, the main market is the sole preserve of visitors and their prey. But in the mercantile quarter of Aswan, tourists are outnumbered by locals doing their everyday shopping. All the components of Middle Eastern commerce – colour, scent, high-spirited haggling – are here.

Going south, the souk unravels into the untidiness of modern Egypt. A final surprise resides beyond the spires of the Coptic cathedral (much more carefully guarded after the New Year massacre at its counterpart in Alexandria, than before). While other cities boast ancient Egyptian obelisks – London and Paris are proud of their needles, while Rome has eight – only Aswan provides you with a journey to the source of the stone spires.

On a baking hillside, you roam around the quarry where these masterpieces of masonry were hewn from raw rock, using the most primitive tools to extract and decorate granite spikes weighing many tons.

One sad specimen still lies there, horizontal – the XL of obeliskery, which was almost at the point of extraction when it cracked in the middle and was left to bear witness to sweat, tears and endless toil. The 21st-century equivalent is surely working as cabin crew on Thomson flights 418 and 419, from Gatwick to Aswan and back?

The unexpected bonus of this new package-holiday destination is that you get an extra day at the end, when you would normally expect to be travelling. The airport is 15 minutes from town, and flight 419 leaves at 6.30pm. From a cabin-crew perspective, the weekly link from Gatwick to the Upper Nile that began last month is the most gruelling in the Thomson schedule. To show how close the 5,000-mile round trip is to the limits of the short-haul package holiday, the narrow-bodied Airbus A320 assigned to the route flies with 15 seats empty, in order to make the weight-distance-fuel calculations work.

The passengers, meanwhile, need do nothing more demanding than keep quiet, watch BBC sit-coms and try to stay comfortable. Considering the constraints of a charter jet for someone the wrong side of 6ft tall, I found the six-hour-plus inbound flight in seat 29D remarkably bearable. But perhaps that was because I was happily weary after a good holiday. A damn good holiday.

Travel essentials: Aswan

* Thomson (0871 231 4787; flies from Gatwick to Aswan on Mondays.

* Simon Calder paid £3,020 through Co-operative Personal Travel Advisors (0800 883 0411; for a family of four for flights on Thomson from Gatwick to Aswan, a week half-board at the Pyramisa Isis hotel and transfers.

* The Foreign Office warns of "a high threat from terrorism in Egypt", and says "attacks could be indiscriminate, including in public places frequented by expatriates and foreign travellers."