Should I remove 404 urls in webmaster tools?
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I've recently removed a lot of category pages so should I remove the urls in webmaster tools or let them drop out of the index naturally?
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I would recommend just letting them drop out of the index naturally. Google basically suggests doing the same thing - http://googlewebmastercentral.blogspot.com/2011/05/do-404s-hurt-my-site.html
If you find that the 404'd pages are still in the index after a period of time, then it may make sense to manually remove them via GWT.
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I've always used GWT as a report on my 404, and since it stops on 1000 404s I always download them for further reference and then mark them as fixed.
404s are a natural response in the whole internet so fixing them is a good thing but waiting for google to remove them from your GWT account amy take long time. If they don0t bother you follow streamline's advice.