Suboptimal names didn't kill yahoo, google or del.icio.us, and probably won't kill your project either.
Just get creative - there are tons of usable domains still available.
2) Make offer through Godaddy domain market
3) Sue them
4) Think of a new name & register that
(I kid, of course)
Visit http://PowerNamer.com
Email them and make a very firm offer of a few hundred bucks. Don't go higher and don't be afraid to walk away. Find options to the name you really want. Options are leverage. Most squatters want a quick buck. If you offer more than they've paid for it and don't seem desperate you stand a good chance of picking it up for an ok price.