I've had a look at the GoDaddy website (which is against my personal policy (I really don't like them)), but you might find you'll get better performance, for not much more money from a true Dedicated Server.
I've found in the past that virtual servers lack the IO performance needed for high traffic sites. It's tricky, but you might need to have some idea of how much IO performance is required by your application. If you're presenting lots of images, which I bet you are, you'll want to be able to read them from disk as quickly as possible, and deliver them to the user fast too.
I think I'd probably go so far as to separate the media server to media.yourdomain.com, and set a different A record for that, to point at a secondary IP on your server, and point Varnish Cache at that, so the frequently requested static assets get served from memory, rather from disk.
Having re-read your question, I'd guess that the reason those two server are so different in price is because the GoDaddy one is a Virtual Dedicated server (which to me, sounds like a contradiction in terms, somewhat), and the other is a true dedicated server (and more the price you should be paying).
If you had a sysadmin on staff, I'd probably suggest that you buy a 1U server from Dell, and put it in Colo in a local datacenter. This can work out cheaper than renting a $500/month server, if you've got someone capable enough to manage it.
I'm also going to suggest that if your site is important, ie, makes you money, then you spend a little more in the outlay, and get 2 servers, and set up some kind of load balancing between them. This would give you a good chance to mitigate single hardware failures, and have a bit of resilliency when things go wrong (which they will, eventually).
I'd also make sure that whatever server you go for, especially a dedicated one, has a pair of hard disks in RAID1 configuration, so that you can cope with a single disk failure without your server going offline.
