I know this is like 5 months too late, but I HIGHLY doubt (As a native Egyptian) that people are offended by the traditional Muslim greeting. I think the issue is that the song is old, but not old enough for people to be nostalgic about it, so people just probably think it's embarrassingly outdated, if that makes any sense?
Like if your troupe used on of Hakim's old songs, and I mean OLD like "Nar" or something, it's like an 80s - early 90s song? people probably would be nostalgic enough to like hearing it, but Alsalmu Alaikom was one of his later songs when he was considered not as good as he used to be. So your issue probably lies there. Personally, I don't like the song and if I was in a wedding or event or whatever and found foreign bellydancers dancing to it I'd just be like "Meh" and wait until they're done and hope they have something better.
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