I see from WMT that my site has 4 (404) crawl errors, each Linked from 2 separate pages. As this is a small directory listings site it would be difficult to delete the missing URLs from the db each time it happens. Does Google penalise me for this in any way?
Does Google penalise me for this in any way?
No, but you will be missing out on traffic Google would have brought to your site (at those URL's) once Googlebot determines that the URL's no longer exist.