tedster - 9:57 pm on Jul 30, 2010 (gmt 0) [edited by: tedster at 11:15 pm (utc) on Jul 30, 2010]
Yes, if you're looking for the cause of a recent ranking drop, internal 404s are not a very likely suspect. Good to fix it before it runs amok - your users sure don't want to click on a 404 link - but I wouldn't expect an immediate rankings improvement in most cases.
You might see some improvement over time from the 404 fix (especially if there were 1,000s of 404 links) because you are repairing the PR circulation within the site by making those links work correctly.
[edited by: tedster at 11:15 pm (utc) on Jul 30, 2010]