There's one problem here:

<appSettings>
   
    <!-- Connection String for SQL Server 2000/2005 - kept for backwards compatability - legacy modules
    <!-- <add key="SiteSqlServer" value="Server=(local);Database=DotNetNuke;uid=;pwd=;"/>-->

Remove that and try again.

---

    YESSS!!!!!!!!!
Thank you JetJam your instructions provided me with a perfect dotnetnuke root install on godaddy deluxe hosting !! :D
Finally!!I've been trying so much I was starting to wonder if I should change hosts, but godaddy's hosting plans are uncomparable so im definitely staying with them !
I have to thank you Micheal, because you are the one that made this possible for us, otherwise we would still be getting errors lol...So everybody, just follow JetJam's instructions and it should go fine :)
Here are some issues that I now understand:
1- if ur getting could not connect to database errors, or connection string errors, then check ur web.config file and if your connection string is still okay then try the whole process all over

2-if ur getting database/dotnetnuke assemby version update error, it means you've tried so many times installing that it's ****ing up.. so what you need to do is start from scratch (delete DB and FILES) and re-start the process and you won't be getting any more of this error

3- and finally , if ur getting "could not find the path of ...../web.config or ..../siteUrls.config  error then check JetJam's instructions, it is important to do as he and Micheal said with the Config and the Root folder

Good luck to all!
and see ya soon ;)