Why did they move ancient Egyptian temples to prevent them from water damage instead of encircling them with a dam?

Shielding them by a dam would have been more costly. And being hidden under a 65 meters deep wall into the water of the Aswan dam would make them visually disappear, and lose their glory.

As it is now they preserve the same commanding view and show the perspective the original artisans who designed these monuments had envisioned.

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A scale model showing the original and current location of the temple (with respect to the water level) at the Nubian Museum, in Aswan.

. Wikipedia article here- And here.