Link Check Your Sites--LinkAlarm costs a penny a page.

Website Validation and Monitoring--SEVENtwentyfour is very comprehensive and very reliable. Their fees vary, depending on site size, but their service never does. Our experience with this company was outstanding. Their robot, Linkwalker, makes regular crawls, both internal and external, and alerts their customer immediately of dead links, possible cause, possible replacement url and all pages affected. SEVENtwentyfour also alerts you of pages on your site that others are linking to that may have been removed, or relocated. Then you know who to contact with the correct link. A real lifesaver. On the one hand, we hated to see their e-mail (it meant more work) but we also relished in its arrival (it meant we knew what to fix).

Google Webmaster Tools will also alert you of any links it has trouble following, and give a reason, if known, such as 'restricted by robots.txt.'

If you know of sites that are preventing SE bots from crawling, then you have only to check manually, or just don't link to them.

As to your original question, I agree with those who feel that dead links won't get you banned. If this were the case, there would be a fraction of pages compared to the billions currently indexed. Does the quality of your site affect ranking? We must certainly believe it does. A well managed site does not have many broken links, whereas a poorly managed one usually has a few, or a lot. As the site breaks down, its content degrades. No amount of SEO will get higher rankings if the site is broken.

One cause of link breakage in many sites is deep linking to expired pages on other sites. When we link directly to content on someone else's site we should expect problems down the road.