Re: Custom 404 page??
Try switching back to the default BP home theme and see if that theme’s 404 page works. If it does, then that means the theme you are using is not up to date with the BP theme file changes.
If that is the case, you can do two things:
1. Try copying over the functions.php file from the bphome file into your custom theme and see if that solve the issue.
2. Contact the theme designer and ask when they plan to update their theme to be WPMU 2.8.1 compatible–I assume you are talking just about the home theme and not the member theme.