@amelia Has there been any progress? We have the same problem. Our __redirect file looks like this:
/ /es 302 Language=es
/* /es/:splat 302 Language=es
/ /en 302
/* /en/:splat 302
/en/* /en/404.html 404
/es/* /es/404.html 404
This works fine for the language-based redirects, but the 404 pages dont work (eg. the default Netlify 404 page shows up). The custom 404 files are one the server as I can reach them if I navigate to them directly (example.com/es/404.html)