The following guide will show you how to get Blogger working properly with a GoDaddy hosted domain.
WARNING: Using a primary domain CNAME alias will effectively override your MX records at GoDaddy. This is a known issue as of 12/27/07. If you wish to use MX records (for example for GMail for domains), use the forwarding method instead of the solution outlined in this post.
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:
- Set up a CNAME referral for the alias www under GoDaddy's Total DNS control panel to the host ghs.google.com
- Set up a CNAME referral for the alias yourdomainname.com pointing to the host ghs.google.com


Step 4: Setup custom domain on Blogger by going to Settings->Publishing and entering your www.yourdomainname.com (or yourdomainname.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.
Conculusion:
If all is setup correctly, www.yourdomainname.com is now hosting your blog. Yourdomainname.com bounces to www.yourdomainname.com (or visa versa depending on how you set it up). All of this is completely transparent to your users and whether they remebmer www or not no longer matters.