Querystring in REST Resource url
Solution 1:
There is no difference between the two URIs from the perspective of the client. URIs are opaque to the client. Use whichever maps more cleanly into your server side infrastructure.
As far as REST is concerned there is absolutely no difference. I believe the reason why so many people do believe that it is only the path component that identifies the resource is because of the following line in RFC 2396
The query component is a string of information to be interpreted by the resource.
This line was later changed in RFC 3986 to be:
The query component contains non-hierarchical data that, along with data in the path component (Section 3.3), serves to identify a resource
IMHO this means both query string and path segment are functionally equivalent when it comes to identifying a resource.
Update to address Steve's comment.
Forgive me if I object to the adjective "cleaner". It is just way too subjective. You do have a point though that I missed a significant part of the question.
I think the answer to whether to return 404 depends on what the resource is that is being retrieved. Is it a representation of a search result, or is it a representation of a product? To know this you really need to look at the link relation that led us to the URL.
If the URL is supposed to return a Product representation then a 404 should be returned if the code does not exist. If the URL returns a search result then it shouldn't return a 404.
The end result is that what the URL looks like is not the determining factor. Having said that, it is convention that query strings are used to return search results so it is more intuitive to use that style of URL when you don't want to return 404s.
Solution 2:
In typical REST API's, example #1 is more correct. Resources are represented as URI and #1 does that more. Returning a 404 when the product code is not found is absolutely the correct behavior. Having said that, I would modify #1 slightly to be a little more expressive like this:
http://localhost/products/code/4xheaua
Look at other well-designed REST APIs - for example, look at StackOverflow. You have:
stackoverflow.com/questions
stackoverflow.com/questions/tagged/rest
stackoverflow.com/questions/3821663
These are all different ways of getting at "questions".