I recommend amazon web services, $ 15 per month for micro-instance for testing / development, and the costs rise from there depending on your needs. However, for the love of everything that is good and beautiful in this universe, do not use godaddy for anything other than SSL certificates and domain names. It just seems like an absolutely terrible idea. They are simply not the people you want to work with on such things.
As alternative VPS providers, there are slicehost, linode, cloud rackspace, and I'm sure some others too. In my experience with rackspace, slicehost and AWS, AWS has been the best to date.
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