[Guvante]

One thing I don't see anyone mentioning is why Google ignores the 404 and still applies the penalty.

PageRank is fully automated, and probably probes pages very frequently. If you let a 404 remove a penalty, people could probably occasionally 404 Google's crawler and see if it helps their rank to automatically remove poorly performing backlinks.

[rhizome]

Google probably sees a 404 penalty remover as technically onerous. It also wouldn't prevent an arms race of spamming ephemeral links, where if the spammer wasn't required to switch domains all the time they'd be able to just stay 4hrs ahead of Google crawler and create a business model oriented around a 4hr link lifetime.