Success!
Everytime I call godaddy, I get a different answer to my questions. However, I got a hold of a good rep this afternoon and she helped me resolve the problem.
in the host settings, here are the configurations you use.
SMTP Server: smtpout.secureserver.net
SMTP Authentication: CHOOSE BASIC. ..... anonymous will not work
SMTP Username: your godaddy email account (if you haven't set one up, you probably should) ex. admin@mysite.com
SMTP Password: your email password.
Now, it works like a charm!
Good luck!