Configuring preferences and options in Outlook.com
I understand why this is confusing, Serena White.
Just a small question, you said you successfully created an account before, when did it happen? Because latest information is that Microsoft no longer allows new personalised email addresses to be created for Outlook.com using a connected GoDaddy domain.
If yours was created before Microsoft retired this feature, then it could explain what's happening. Existing personalised email addresses can continue to work, which is why yours is unaffected. But your wife cannot create a new one through the same Microsoft 365 Family setup.
If you need to create a new mailbox for your wife using that domain, the practical option now is to move the domain's email hosting to a Microsoft 365 Business plan that supports it. With a business subscription, the custom domain can be added to Microsoft 365 and individual users can have addresses on that domain.
If you believe your wife's address should already have been eligible, then this would need to be checked by Microsoft Support. Microsoft Q&A is a user-to-user forum, so we cannot see the provisioning/status of the personalised domain on your Microsoft accounts from here.