Even we all know that redirecting 404 errors to home page (or another page) isn't the right thing to do.
No we don't know. Based on what? Rumors and spins? You need to give priority to the site's usability. A 404 page has it's uses but for non-existing requests, I would do 301 to the most appropriate place.
Having said that you need to ensure the 301s are done correctly. Incorrectly setup 301s can damage ranking so if you're uncertain leave the default error handlers in place.