Convergence - 5:56 pm on Mar 5, 2013 (gmt 0)
Whenever the 404 errors in Google Webmaster Tools get to a certain point (about 50), which are all due to typos --because I don't have any broken links, then my traffic drops off until I remove the errors then it picks right up again.
Interesting - haven't seen a correlation between the number of 404s and traffic (Doesn't mean it doesn't exist). Logically, it makes sense. Better logic would be for the Google to immediately plunge that page deep into the SERPs. See days where the Google seems to only be hitting 404 pages, as if It was getting ready to delete those 404s.
Reason I say this is because we have 10s of thousands of 404s at any one time (1M+ products/price comparison type site).
Maybe if we didn't have them - hmmmm...