Redirecting to 404 is OK
A 302 redirect to a 404 page is OK
PageRank to 404 Pages is Lost
If a site links to an external page which returns a 404, the PageRank will be lost.
404 Pages Crawled Less Than Noindex
For expired/removed content, John says that Google prefer a 404 as it results in less crawling than a noindex.
Redirect Expired Pages to Alternatives or 404
Out of stock/expired pages can be managed in a variety of ways. If there is a relevant alternative product, or a category page with good alternatives, a redirect is OK, otherwise a 410/404 is best.
301/404 Won’t Cause Ranking Problems
Large numbers of 301 redirects and expired/low value URLs which 404 won’t directly cause any general ranking problems for the site (assuming you’re doing them properly and not losing important pages). But try to avoid chains of mutliple redirects.
Soft 404 Errors Can Identify Thin Pages
The Soft 404 errors report in Webmaster Tools is a good way of identifying thin pages which Google don’t think have any original content.