Hi Mathew (I assume :) )
The error source file "d:\hosting\mavensoft\easybug\src\bugnet_wap\web.config" is indicating to me that you are trying to run the source code on your production box and not the install binaries.
Please deploy using the installer package. The best way to do this in a hosted env is to install to a local machine. get everything you need working (inlcuding the database in APP_DATA) and then simply copy those files to the web server.
Then configure your ASP.NET application virtual folder thingy and all is good. This is very important and it appears that you have not done this. I am not sure how GoDaddy's mangement interface looks, perhaps a quick email to them on how to configure a "virtual directory" as an ASP.NET 2.0 application will help.
Also another thing, do not expose your machine key when you post to the forum !
Stewart Moss