Here's a quote from an article containing information on how the Ancient Egyptians found North:
Using computer simulations of the night sky as it would have been seen at the time of the Egyptians, Dr Spence, from Cambridge University, suggests that the ancient Egyptians carefully monitored two stars which revolve in the northern region of the night sky.
The north-finding stars were Kochab, in the bowl of the Little Dipper (Ursa Minor), and Mizar, in the middle of the handle of The Plough or Big Dipper (Ursa Major). Dr Spence says that the ancient Egyptians realised that when one was directly above the other then the line between the two-marked true north.
Taken from Here
I seem to remember that the AE's used a plumb bob to determine when one star was directly above the other.
The AE's didn't consider North as 'up' as you said, though, Northern Egypt was known as Lower Egypt, and Southern was Upper Egypt.