My friends and I have just been kiting at KiteVillage kite station recently. We stayed in the camping 5 min walk from the beach, with the cost of EUR 50 per night, including dinner and breakfast. The food was rather good and the overall quality of the accomodation was allright (air conditioner, shower).
We all really loved the spot - water much warmer than in Hurgada, knee-depth or a little higher good for practicing free style. Lots of space - can find a place without much traffic. It's not allowed to come close to the mangroove trees, though
Also if you like you could consider a beautiful wild spot located north to Marsa Alam (you can find it in Google Earth: 25"18'01.16C 34"45'14.14B).
It is a deep-water lagoon, separated from the open sea by a shallow coral reef. The depth starts just 1 meter away from the shore. The wind usually is side-sea (north-west) and the water is nearly flat - perfect for freestyle. However you will need to get a car/taxi (the nearest hotel is Equinox El Nabaa Resort) to get there and have somebody to launch and land your kite. Also you need to be able to edge confidently so as not to end up in the corals.
You can see a couple of pics of this place here (please don't get confused by the Russian language
When we came to this lagoon we just missed a whole bus of Italian kiters, obviously the bus took them to the lagoon from the nearest hotel. It's a great kiting spot for advanced riders, and it's for free (Kite Village is 30 Euro per day, as far as I recall).