I appreciate all the responses. Here is what I did to fix the problem, and if I 
may ask a follow-up question. 

Ollie mentioned "you have to create a 'Host Handle' in the registry database at 
first, normally your registrar". 

1) With my ISP's help, I got into the their domain registration management 
system for inn0vate.com. (This is not registered through GoDaddy.) 
2) At the bottom of the name server page it says, "If you want to create or 
modify a nameserver which is based on inn0vate.com click here." 
3) I then added ns1.inn0vate.com and ns2.inn0vate.com along with their IP 
addresses. 
4) After that I went into GoDaddy, and it immediately accepted the name servers 
for the test domains. 

(Hurray!) 

My follow-up question. I want to write up a post on my blog to educate any 
future lost souls like myself. :) Could I please ask whether my understanding 
is too far off? 

I can do the steps now, but I don't understand what's going on here. "Host 
handle" / "host object" are new concepts for me. They seem to be related, but 
above and separate from the global DNS system. 

The following pieces exist: 

1) ISP registration: inn0vate.com (The ISP is also a reseller for Tucows.) 

2) Name servers for inn0vate.com: 
* ns.xmission.com
* ns1.xmission.com
* ns2.xmission.com

3) DNS entries in ns*.xmission.com for my name servers: 
* ns1.inn0vate.com -> IP1
* ns2.inn0vate.com -> IP2

4) Any machine on the Inernet can resolve ns1.inn0vate.com and ns2.inn0vate.com 
to the correct IP addresses. 

This much I understand. 

The following pieces are what I don't understand: 

Attached to (1) above but separate from (3), there is a registrar-level list 
for name servers associated with each domain. It appears that this is some sort 
of "approved" name server list. This is not a universal mechanism, but exists 
only on some gTLDs. The entries in this "approved" are the "host handles" or 
"host objects".  

GoDaddy requires that (some? all?) name servers not only have resolvable names 
but *also* be on this "approved" list of name servers before it will allow them 
to be used. 

Am I way off here? 

Thank you so much for your help. 
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