Thanks for the help Milos, you got me going in the right direction.
Just like most problems I'm having is due to Godaddy hosting(linux server).
Here is a working FIX that worked for me!
" Enabling Joomla SEF URLs while using GoDaddy requires a few extra steps. GoDaddy has its own unique configuration that can leave many new Joomla users puzzled. If you search the Joomla support forum, you'll find a lot of GoDaddy customers that can't get Joomla SEF URLs configured properly. This post will show you step-by-step how to enable Joomla SEF URLs on GoDaddy hosting accounts."