If they are truly gone, then a 410 would be the best option for you. Since they are indexed even if there are no links pointing at them, people can still find them besed upon what they are searching for. You never know when your link will show up, because you dont know how long google is going to take to get rid of the links.

http://www.checkupdown.com/status/E410.html 

"The 410 error is primarily intended to assist the task of Web maintenance by notifying the client system that the resource is intentionally unavailable and that the Web server wants remote links to the URL to be removed. Such an event is common for URLs which are effectively dead i.e. were deliberately time-limited or simply orphaned. The Web server has complete discretion as to how long it provides the 410 error before switching to another error such as 404"

We did this for a client that needed old defunct pages removed. Once you set the pages to return a 410, and use Google url removal tool, you should see them dropping off really quick. (all of ours were gone within a month) Having that many pages return a 404 may be hurting the experience of your users as when they see a 404, they go right for the back button.

Optimizing and managing 500 different domains is not only impossible under a normal workload, but also will make each site harder to rank.

Like William stated, you are splitting any link juice over 500 different sites. I would focus your efforts on a few domains that produce excellent results, and either let them expire or park them all on top of one domain.

Personally, I think true directory or public information outlets are the best.

I would look at the service or product you provide, and try to understand where people would go to look for that item. If it is a service, where do people go to find out information about that service? Are there any leading authorities that you could become a member of, or post content to?

If it is a product, how do people look for it? Where do people go to look for it? Do people review it? Is your focus local or national?

When looking for opportunities, you have to be creative. I understand you are looking to increase your ranking, but you also want to have links that people will USE, not just to sit on some directory in a hope of being a ranking factor. If you are deadset on getting just links, use the MOZ backlink analyzer to see who your competitors have linking back to them.

We have been seeing some strange things happen in Google local after the most recent update. We used to show up in the maps all the time and have made no major edits or changes to the profile.

Now when we search for our services, we show up high in the organic results, and not at all in maps (local listings). We have our profile setup as a service area since we do meet with people and provide services at their location, but also have checked the option that we also serve people at our address.

I am wondering if the recent update favors actual storefronts when people are searching for services. Any ideas? Technically all the actual work is provided at our location, and the service we provide at the service area locations is based upon consultations. If we switched it to an actual storefront listing could that possibly help? Our profile is fairly strong, and has reviews, long history of posts, etc.

What gives Google?

While the tagging system is nice, it can be a killer for seo. Tag pages generally have thin content, and a lot of links i.e. bad for Googel guidelines. If you want to help your users, and still use the tagging system, set the tagging pages to "no-index"

As to the categories URL's I would add them. Think of your site like a book, and your categories like the chapters. Setting your site up with categories also allows you to potentially have another focus keyword in your URL, and helps users navigate your site easier

As long as the url is accessible, it doesnt matter. You can redirect from a subfolder, or using root domain.

One thing to remember, make sure you redirect both www, and non-www versions. Are you using cpanel? It makes this a super easy process. If not, let me know, and I can supply you with some htaccess rules to get you started.

*Keep in mind, all link juice is not always transferred. Generally most will be passed through, but I just wanted to make you aware.

In the great Google infrastructure, I'm sure that Google knows what IP address your site is hosted on, and all the ones tied to it. In one of the past MOZ blog posts you can see a number of factors Google looks at to see what you control. We used dedicated IP's for each client, just in case anything ever happened to one account, it would not affect the others. They are close in IP address range, since they are on the same block, but none are on the same number. This isn't an attempt to gain SEO rank, as much as it is to protect the client.

Locally, I have reason to believe its a different story. For example, we are located in St Louis, and use a local server center located in downtown St Louis. After changing our site from hostgator under a shared IP, (Provo, Utah) to a local server center, we saw an drastic (in internet time) improvement in site load time, responsiveness, and believe it or not, a ranking boost....true story, no joke. It wasn't a large boost, but we moved up 2 spots on our main keyword on page one, and 1-2 in other places. We didn't make any other changes to the site, other than adding a few blog posts, and this was not around any major algorithm shift or update. We have seen this pattern repeat with other clients as well.

My guess is that Google liked the decreased load times, the local server location (as it matched the city on our site, somehow verifying our location further), and the fact that the site was on a dedicated IP address. If we had just changed the site's IP address by itself, I do not think we would have seen any impact or result change.

"there is really no SEO benefit of having a unique IP for each of your sites unless you're attempting to pass link juice between each, which falls into the greyhat category."

I don't think you would get away with this for very long, or that it would benefit you in any way. Google would see that you host or control these sites through your analytics account, or IP range. If you wanted to pull it off, and have separate analytics accounts, dedicated IP's etc, I doubt the result would be worth the time.

I love these types of questions

It always gives me a chance to support one of my favorite tools, SEO-browser. This tool allows you to see what a search sees when they come to your site. What you see is not always accurate. Here is a quick crawl of your page in question:

http://seo-browser.com/index.php?address=http%3A%2F%2Fwww.seniorplanning.org%2Fassisted-living-phoenix-arizona%2F&button0.x=54&button0.y=9&button0=Simple

You can see that your H1 shows up high in the content, and that the image slider is not pushing your site further down other than visually. I don't think that the "above the fold" is as important as other areas of the algo. I have seen hundreds of sites do amazingly well with very large or fullscreen image sliders, and H1's after the scroll. As long as you are covering your main keywords in your content, H tags, meta and page titles effectively, I think you will be fine.

If you are going to do some edits on your site, bookmark that tool. It helps to see when sidebar headers or template headers are rendering out as h1, h2, or h3's.

I always preach to use your heading tags like you would when writing an article in Microsoft Word, and use 1 H1 tag per page.

Main Subject Line that Includes Keyword or Mission

Words that explain the information you are trying to cover, and your "mission statement". Include higher amounts of keywords within first paragraph while not stuffing. Should also contain some sort of conversion statement or button

Secondary Information or Second Viewpoint

Words that include keywords and viewpoint.

Last Heading Includes Summary or Closing Arguments

Include high points of what has been covered

CMS sites often render out header tags like mad, causing you to have multiple H1 tags on a page. To check to see if yours is doing this, use SEO Browser. IMO, you can have more than one H2, as you may have multiple high level topics to cover on one page. Keep in mind, you can always use CSS to make

text render as a heading tag, so your page doesn't look goofy. For example:

If your h1 css looks like:
.h1 {
font-size: 28px;
line-height: 29px;
font-weight: bold;
}

then set up a div class:

.largeptext {
font-size: 28px;
line-height: 29px;
font-weight: bold;
}

and they will look the same, but not render an additional h1 tag per page. Use this for your sidebar and page styling areas that also render h tags.