Well Matt explained it in details on how the New toolbar reacts on a Error 404 error that may be encountered by the new toolbar.
According to Google Webmaster Blog the 3 site issues detected by Google Toolbar where it will make a suggestion are as follows
- 404 errors with default error pages
- DNS errors
- Connection failures
and the probable suggestions provided by the Google Toolbar will be as follows
- A link to the corrected URL
- A link to the cached version of the URL
- A link to the homepage or HTML site map of your site
- A link to a higher level folder
- A search within your site for keywords found in the URL
- An open Google search box
I have downloaded and tested it : [ Be Sure you have Internet Explorer 6 installed in your computer ]
I make a wrong URL to have an Error 404 but nothing unusual seems to happen. Did you test it ? Does it work for you as how it works from Matt ?