yes, morale is EVERYTHING. You can have an 8,000 man army routed by a few hundred if they have no morale. Morale is the big slider when units enter battle that goes from green to red. it is also shown when you look at a particular unit. Do NOT enter battle if morale is lower than say... 85%. It's a waste of time and men. You will lose.
You don't want to hold the whole coast as demesne - the egyptians might not declare war on your vassals, so their territories remain safe havens for you to retreat and regroup.
the egyptians have problems at their own at various points. when the crusades happen, they usually end up with repeating waves of knights smashing at them. the turks or the qara khanids cause them trouble, and sometimes their vassals go after them as well. when they are weak, you strike. when they attack you, let attrition do damage for you while you prepare a counter blow in a safe location. the most important thing on defense is to destroy armies - if they take a province or two you can always take it back after you've defeated their main forces. also, the computer is stupid. he splits his armies up when he should keep them together. destroy them piecemeal.
but first, as the apulians, you need to take sicily. if you do not do this, you are just fodder for them. palermo, messina, and siracusa are wealthy and advanced. with them, you can defeat the egyptians. without them, you are going to have a tough time.