A Google Webmaster Help thread has Googler, JohnMu, replying to some concerns about using 404s, page not found commands.
Having a large number of 404's on a site is generally not a problem for us, especially if the 404 page helps the user to find related entries within your site.
Of course, Google likes when webmasters return proper http header codes, especially in the page not found case. JohnMu explains:
Using a 404 (or perhaps, if you're certain that the page will be gone forever, a 410) is a good idea because it helps us to remove the old entries from our index over time.
Some people feel 404s are a bad thing. They are not. Use them properly and they can be extremely helpful to the health of a whole web site in a search engine.
Forum discussion at Google Webmaster Help.