I'm confused about 404 error messages and webmaster tools advice?

I have an a .htaccess file which states:

ErrorDocument 404 http://www.XXXXXXX.com/index.html

and these soft 404 redirects have been working fine.

In webmaster tools I have just received the error:

"Increase in soft 404 errors - Google detected a significant increase in URLs we think should return a 404 (Page Not Found) error "

So google wants me to return a 404 on my deleted pages but for my visitors I want a redirect to the home page (in-case of mis-typing).

Later google advice a little vague:
"But it's important to remember that it's not enough to just create a page that displays a 404 message. You also need to return the correct 404 or 410 HTTP response code." https://support.google.com/webmaster.../2409443?hl=en

I don't want to use 301 because there are too many low value pages.

So how do you return a 404 code to google's robot but direct visitors to a custom 404 error page? I cann't seem to find an answer anywhere.
Thanks