This is from my quick documenation.  

   10/23/2009 (IQworks - Information Quality Works)
Setting File Permissions on Godaddy with Frontpage Extensions.  

  I keep frontpage extensions installed so that I can access my domain with VS2008. But the DNN folder itself needs
read/write permissions and so do all of its subfolders I think. In my case, my DNN is a subdirectory on my shared hosting domain.
  The point here is to change the root directory (NOT your dnn root, your domain root) permissions to read/write and, to
have those permissions inherited by all of the folders in your domain. (You can deny permissions on your sensitive folders later)
  Strange, and it could be me, but I could not access the root to make this change with frontpage extensions installed, and then,
I uninstalled frontpage extensions, made the permission changes to the root and reinstalled frontpage extensions,
and, I COULD access the root - oh well, here is how I got to the root anyway.

I closed VS2008
I closed FileZilla (and anything else that is connecting to your shared hosting domain - my paranoia)
Uninstall frontpage extensions (be sure it is uninstalled). If you had permissions setup for the domain root before, uninstalling frontpage
extensions will undo these permissions.
a - In godaddy, get to the File Manager.
b - Click on my domains root folder (not my dnn root folder).
c - When the check box comes up for the domain root, select it. (This is what you cannot do while frontpage extensions are installed - well, somtimes)
d - Click on the permissions icon.
e - Select Read, Write and reset all children to inherit and click OK (notice the last columns title is permissions).
f - Wait until permissions are applied (little progress spinny is done) ..... and then I clicked on my dnn folder
(I backed out of File Manager and then went back in to make sure I got a fresh File Manager page).
In the very last column I could see read/write icons (They are grayed out but you should see the two icons)
Select your dnn folder, check one of the folders (I selected portals) in the dnn folder and click the permissions icon, you should see
inherit permissions from parent and read/write checked.
g - Rebuild your website (optional).
h - reinstall frontpage extensions (make sure they are installed).
i - double check the root and dnn folder permissions to make sure frontpage extensions didnt do anything to them (my paranoia)
Check mark the dnn folder, click on the permissions icon (up top).
j - If the permissions are read/write and inherit permissions from parent (all will be greyed out) are checked, your good to go.
(Notice that, with frontpage installed, the last column says File Type now instead of Permissions )
k- Rebuild your website (optional)
l - Load VS2008.

  Hope this helps someone ....