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I am an EEA2 card holder which expires in March 2013. Do i need to apply for EEa4 or i don't need to as i heard that there is a provision that you don't need to apply for EEA4 and still can apply for british citizenship after 1 year grace period

See also The documents we require for naturalisation applications and Naturalization after PR Shocking Revelations from NCS.

You need to remember that the EEA forms are not asking for permission but instead are asking for recognition of your rights. Your PR is therefore automatic after 5 years of being resident in the UK and exercising treaty rights.

It is therefore up to you if you want to complete EEA4 to get the PR card/stamp and thus in 12 months time (or more likely 6-8 by the time you actually get the PR stamp) you can apply for BC only having to demonstrate you meet the standard requirements (5 years resident, 1 year free of immigration control, good character, sound mind, not too many absences)

Alternatively you can effectively do the two together after having been here 6 years but you then have to include the paperwork for proving you are eligible for PR at the same time as applying for BC.

There isnt a "best" route, in my opinion. EEA is free but you lose your documents for a while but you are likely to have issues at immigration if you tried to come back into the country with just an expired visa and a bunch of documents proving exercising treaty rights.

If you've time, get PR first. It's free and simple to apply for.