Wilburforce - 9:53 am on Mar 6, 2013 (gmt 0)
this is from 2008!
Well, the "Do 404s hurt my site?" part is dated May 2011, but that doesn't necessarily mean the advice there still applies.
I note in passing that there is a link ("help them find what they were looking for") that supports the use of custom error pages:
Another possible problem with doing that if you have a large number is that (in my case, anyway) WMT reports duplicate title/description tags for 404 pages: it treats the content of the custom error page as if it was the content of the missing page.