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It's not a problem, but you're cutting yourself off of a gain... in my opinion.

What i don't get is that... are you the maker of these products?
Or are you just selling them ( perhaps even as affiliates )?

Okay, IF you're the manufacturer, or perhaps a long time and trusted seller, here's what i'd do... ;)

I'd keep the pages, only have them linked to in a different link hierarchy, ie. not the product index, but something like the "product archives" or "product history" or whatever. Keeping the URLs the same, but of course adding something like "we no longer carry this product" to the page, removing links to payment or perhaps even say "We don't have this anymore but maybe you'd be interested in this"... i mean if you have similar things... why would it hurt to tell people about it. ( Sorry there's just way too little info on what you do on that site :P )

IF it was unique that is.
If it can be found just about anywhere on the net, then this isn't a good idea. Make that... don't do it then.

But in case it was unique, or offered some unique information, comparison, whatnot... i'd say keeping it under such a category would not harm you. If their PR would drop because of the new category, they'd become supplemental at most. They'd still be there, and showing valuable historic data both to visitors, and google ( about your site ). The history of URLs does play a role in trust i think...
( must have read it somewhere :P )

So if it wasn't just an affiliate feed, but unique info people might still find interesting... i'd say keep it, just in a user friendly way. And add a vote button, or counter to see if enough people are curious about such products for the company to carry them once again :)

...

If it can be found elsewhere or has no additional value other than the "buy now button" delete it NOW >:)

We don't use data feeds. We are not an affiliate, however other sites offer the same or similar products. We don't have an exclusive internet presence with our suppliers. Our individual product pages are indexed (not supplemental).

One part of the situation we hadn't thought much about is the link issues.

If we remove the link to a discontinued product from our product indexes and change that page with links to similar products, it becomes a doorway page. We wouldn't want to link to a discontinued page from our product indexes so to avoid a doorway page, we would have to create a "discontinued product index". Would this help both users (who got to the page directly) and help the site from Google's point of view?

Keeping those products that don't have any similar product(s)could be pointed to our "trusted" competitors that have similar products.

I mean even if it's the most minor version of a redirect spam, having a page about something that ranks but doesn't exist, pointing to another...

Mm... that's not good. Although those redirects are mostly 302s.
But the reason to penalize or ban a site with lots of these is the same... i guess.

I'd say either a 404 ( with a unique error page, perhaps serving links to similar products based on what nonexistent URL was requested... i'm not sure if it's even possible )

Or keeping the URLs as i mentioned... but... if the content is not unique... ( although i've seen thousands of pages on Amazon, and other sites with "this product is currently not available" or "alert me when this product becomes available again"... )

Technically, you could have a different 404 error page for different sections of your site, if you really need to. I would also investigate doing that.

Agreed on the 301 approach. We have used 301's where the page was exactly the same except where the URL itself changed. We have done that to avoid duplicate content between the new page and the old supplemental page (which is physically gone but is still listed as suppplemental).

Some of the sections that we 410'ed had quite a few external links to them. In hind site we should have rewritten those pages with the "sorry no longer available but here are some similar ideas for you". Then check periodically to make sure the links are still there to avoid the doorway issue.

I think we have a plan now.
If the page is obsolete and no external links, let it go 404.
If the page is obsolete and has external links, rewrite with customer options and let it go 404 when those links are gone.