Original Poster

effect of spam inbound links showing up as 404 errors

I have read the FAQs and checked for similar issues: YES
My site's URL (web address) is: http://www.medlawplus.com
Description (including timeline of any changes made): The traffic on my main commercial site dropped about 50%+ during a few day in April of 2011. My sites traffic has not been this low in over 7 years. The traffic has not returned, and perhaps gotten worse. The drop in referrals from search engines is greater that 50% during this period. About this time I noticed a large influx of spam inbound links that were showing up in my google webmaster tools as 404 errors. The inbound URL was intentionally broken in that extraneous characters such as "..." were placed into an otherwise good URL I have read elsewhere on this forum that one should not worry about spam inbound links but I think this is bad information. It is prevalent for webmasters to make the connection between these spam inbound links and precipitous drops in website traffic. Here is an outside forum where this problem has been discussed.
This problem has been reported numerous times on this google forum as well but, other than denying a problem exists, I have found no concrete remedy for the situation. In desperation, I have tried to identify the spam inbound links and 301 redirect them to a new page in my site I am calling "spamlinks.tpl", which as been assigned a ".0" priority in my sitemap. I also posted a request for ranking reconsideration to google at:
Given we are talking about hundreds of bad links over the months this attack has been known to me, this has been a time intensive problem. If this works (i.e., search engine traffic rises), I'll post a follow up here.
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Oh here we go again.

Original Poster
The attackers also have spread spam broken inbound links to my other sites that refer to medlawplus.com (but not to my sites that do not refer to medlawplus.com). Thus, jjraymond.com and http://llcoperatingagreement.blogspot.com/ have the same problem (to a lesser degree).
Original Poster
I now realize that the spam inbound links are not limited to those with bad URLs resulting in 404 errors. I discovered this evening, that my site medlawplus.com has 943 inbound links from a spam link farm. I assume the attacker did this to destroy the trust factor of medlawplus.com in the google index.
Note: this google forum won't let post the URL for the spam link farm site. I get the error message: "Your input contains disallowed URLs. Please remove them and try again." Google knows this is a spam site yet they are indexing inbound links to my site from this garbage.
When the URLs with status 404 are created because of malformed links to your site from spam sites, do not redirect them to good URLs that return HTTP status 200 (OK). The fact that you give the destination URL low or zero priority in the sitemap is irrelevant, what is important is that you confuse search engines by giving resulting status 200 (OK) for the incorrect URLs, and you transform the bad links into valid URLs of your site and so you signal to search engines that you consider the malformed links from spam sites as relevant to your site. Do not redirect the bad malformed URLs with status 404 to URLs that return 200 (OK), you do not need the "link juice" from spam sites.
Original Poster
Cristina, I don't care about the link juice (as you point out). The site has 19k inbound links. These intentionally broken 404 inbound links are temporary. Whoever sets them up only leaves them in place 1 or 2 months then deletes them. The whole point of their scam is to create large numbers of 404 errors in your site's profile with google. So I don't think having a few hundred links from these sources is a big concern either as they reverse out over time. The links come from hundreds of sites so its hard to correct each one individually. Not wishing to do evil, I am hesitant to 301 redirect all of my spam links to someone else's site.
Now, I am also being attacked with thousands of links from bad sources directed at my top performing pages. That is a related problem and I have dealt with it by RewriteCond %{HTTP_HOST} in htaccess (using a simulator program for a windows server) back to the home page for referring URL's. In this case the links more permanent with large numbers of links from each offending URL, making it easier to deal with the issue.
To add to JohnMu's comment
>Obviously, if you notice that people are using those links in an attempt to reach content on your site, it's worth redirecting them to the actual content, but that's more of a usability issue (if you can determine that users are trying to reach a certain piece of content with an incorrect URL, it's nice to help them to get there automatically). 
I installed the GA (Google Analytics) tracking code on my custom 404 page specifically to track the actual number of visitors that I could potentially gain from the various low quality sources (as John said " truncated from incorrect copy & pasting, or from incorrectly scraped search engine results pages").
The results?
Not worthy of being tracked.  Most definitely not worthy of the time required to generate 301 redirects.
time better spent updating the custom 404 page and moving on to more important things.
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