I've found that if you have a reliable third-party DNS service with a good interface, using godaddy just for registrations isn't that painful. You get to avoid the worst parts of the godaddy interface -- and just need to deal with their annoying upsell attempts each time you renew.

I use godaddy to register my domains, and I use the DNS management I get with my VPS provider (slicehost). I have no complaints.