UPDATE 12/05/07: There is another solution that bypasses having to set up domain forwarding! Read about it here: http://www.compender.com/2007/12/setting-up-blogger-for-custom-domains.html
The following guide will show you how to get Blogger working properly with a GoDaddy hosted domain. Both "yourdomainname.com" and "www.yourdomainname.com" will point properly to your Blogger hosted blog.
Step 1: Have a Blogger hosted blog. E.g. "yourblogname.blogspot.com"
Step 2: Have a GoDaddy parked domain. E.g. "yourdomainname.com"
Step 3: Turn domain forwarding on within GoDaddy's settings and forward it to your blog on Blogger. E.g. http://yourblogname.blogspot.com
Forwarding may not be active for an hour or two. If eight hours goes by and your domain is not properly forwarding, file a ticket with GoDaddy support and they will get it working.
Step 4: Set up a CNAME referral for www under GoDaddy's total control to ghs.google.com
Step 5: Setup custom domain on Blogger by going to Settings->Publishing and entering your www.domainname.com address.
IMPORTANT: If you have Google Apps running for your domain, such as Gmail for Domains, you MUST login to http://google.com/a/ and disable Web Pages before blogger will allow you to publish to a www subdomain.
If all is setup correctly, www.yourdomainname.com is now hosting your blog. Yourdomainname.com bounces to yourblogname.blogspot.com which bounces back to www.yourdomain.com. All of this is completely transparent to your users and whether they remebmer www or not no longer matters.