404 Custom Error

What is the best way to handle a custom 404 redirect? Currently, our Custom 404 redirect shows up as a 302 status instead of 404 status. See below for code:

<CustomErrors Mode="RemoteOnly">
 <error statusCode="404" redirect="~/404/" />
 <error statusCode="500" redirect="~/500.htm" />
</CustomErrors>

What I would like is to have the 404 error shows up in our SmarterStats Report and I would also like to find out the source of the 404 error. With the current setup, I am having a hard time find out the source of the 404 in SmarterStats.

Thanks,

LW