IIS 7 returns HTTP 200 on custom 404 error page

Switch to using responseMode="File" however the trick with this is going to be using relative file paths unless you unlock or set to true system.webServer/httpErrors allowAbsolutePathsWhenDelegated.

Example web.config excerpt:

<httpErrors>
    <remove statusCode="404" subStatusCode="-1" />
    <error statusCode="404" prefixLanguageFilePath="" path="error\404.htm" responseMode="File" />
</httpErrors>