TheMadScientist - 9:11 pm on Oct 24, 2012 (gmt 0)

I wouldn't say it leads to a 'penalty', per se, but I would say in a game where the separation between 1st and 10th is 0.0001 (assuming only 1,000,000 possible results for a query) I think you should be all over every detail you have control of, because personally, if was at a search engine and had as many choices as they do for a query and my goal is to make my visitors happy so they keep coming back and using my search engine I'm going to send them to the 'safest choice', which isn't the site with the broken links on it...

In my opinion, the site the owner didn't 'lazy out', 'shrug' and think 'well, there's not too many broken links on here in relation to my page count so I'll just leave them...', is a much safer choice than the one the owner was too busy (lazy) to spend the time it would take to find and remove the links so where ever a visitor clicked they were taken to the right page with the right information.

I would also think broken links could easily influence the number of people who click the 'block results from' link, which is another 'indirect' factor influencing rankings and could easily be related to a site containing broken links.

It's your site, but I would think you want to make it the best choice for search engines to send their visitors to, so in my opinion, every detail you have control over that can influence the 'safety' of search engines sending their visitors to you is important, which includes every single link you place on your site...