From the Geniza
"The religious minorities formed a state within a state, by law as well as in fact. The group consciousness of members of the various religions was similar to that of modern nations. The adherents of another faith were not necessarily enemies, but certainly foreigners...
"In view of these facts, the modern term 'discrimination' can be applied to the Middle Ages only in a qualified sense. When an alien today is treated differently from a citizen...he is not being discriminated against, but is so treated because he does not share the financial and other responsibilities of citizens or permanent residents. Similarly, Christians and Jews regarded it as natural, albeit burdensome, that certain restrictions were imposed on them by the Muslim community in the midst of which they lived, but to which they did not belong. They, too discriminated against Muslims." (Vol. II, pp. 273-4)
Goitein argues that there was anti-Semitism in the society covered by the Geniza, which the writers of the Geniza documents called sin'uth. However, this term is only used to describe certain groups or individuals. Much as today, the worst interfaith relations were apparently in Alexandria. In one incident which set off a lot of sin'uth, a Jew was accused of raping a Muslim girl. The Jews appealed to the Muslim qadi to address the situation. This also seems to support my earlier point about the kinds of stereotypes current in the medieval Middle East - today when we think of social elements likely to be stereotyped as rapists, "Jews" doesn't leap immediately to mind. Letters also indicate there was a lot of Jewish-Christian enmity in that city, for one letter says, "These days no Jew does one a favor; it is as if one went for help to a church," while another describes a certain Christian's attitude toward him, "As if I personally had killed Jesus." (Vol. II, p. 281)
According to Goitein, circumstances such as these were very much the exceptions. Despite what one might expect from the Covenant of Umar, new synagogues were built, usually without any hassles. In one case, there is a record of a qadi concerned about a Fatimid caliph's opinion helping the Jews to find a loophole allowing them to build a synagogue in Hebron. We read of a pious Muslim who is lax about collecting rent from a building the Jews were using as an informal synagogue because he wanted to show respect for all religious devotion. Restrictions on clothing were apparently not only unenforces, but most of the time no one even seems to have thought about them, except during certain periods of the 12th century and more frequently thereafter. (This would correspond with the period of the Crusades, as I noted in my last post on this subject.) Jews report that Muslims with whom they travelled were understanding of their need to observe the Sabbath.
In terms of social and economic interaction, Goitein compares the Geniza society, which is basically the Muslim Mediterranean, especially Egypt, from the 10th-13th centuries, to the modern United States. (Vol. II, p. 289) Even when you had a "Jewish Quarter," evidence suggests some non-Jews also lived there while Jews lived outside it, and the author declined to even try counting instances of interfaith renting. (Based on outside knowledge, I suspect Morocco was an exception.) Although there was usually a strong preference for working with people of the same religion, all markets were intertwined, and there were interfaith business partnerships even into the 13th century. Relations between Jewish and Muslim religious leaders seem to have often been cordial. On at least one occasion, Muslims turned out to celebrate Purim, though this was more common with Christian religious holidays.
All in all, judging from the writings of literate Jews as preserved in the Cairo Geniza, life as a Jew in the Western Islamic lands during this period doesn't seem to have been all that bad.