Hey Susie,
I visited Sfax in 2004 and loved it.
I went to Kerkenneh too, on the ferry and saw some dolphins offshore.. I could only imagine the abundant sealife under the water.
I was surprised that there werent any glass-bottom boats, as there were in Aqabah, Jordan. Or maybe there were on the tourist-y parts of the island.
I cant really recomend hotels or anything, sorry I stayed with my in-laws and ate in, lol. But I do know that is was a beautiful city, esp the old downtown (Souk Alarabi) and the various 'Babs' that suround it.
Hope this has been some help! Have fun in Sfax!
-Safiyah
http://groups.yahoo.com/group/wivesoftunisians