A few months back I developed a site for an accounting firm which was hosted by godaddy. Everything worked fine up until the point I uploaded the .htaccess file for the seo urls. For some reason it was being completely ignored.
After some time doing research on google and forums I narrowed the problem down to a few key points.
The solution to these problems is to prepend the following lines to your .htaccess file and if at first they dont seem to be working wait an hour and reconfirm which I'm sure you will agree is both a pain and totally insane.
With regards the php files being processed first I have not seen that behaviour myself so it may have been a bug that GoDaddy has corrected.
One other thing to note was that some bloggers mentioned having to set the RewriteBase. I dont think it is necessary but just in case I am including it in the code.
Options +FollowSymLinks
Options +Indexes
Options -MultiViews
RewriteEngine On
RewriteBase /