Check out some tool stores, and equipment stores. You should be able to find a hole saw for cutting steel pretty easily. If you can find them, a hole saw that uses tungsten carbide burrs as teeth (same concept as a diamond bit) can be had for not to much. They have a replacable pilot bit usually. you may even find them in the local hardware store if its any good.
That seems like the best way to me, drilling gradually larger holes would work if you could find bits that big. But alot of times a bit will grab more when its going into a smaller hole than if your just drilling straight through for the first time. And if you don't find bits that big, than once you've drilled a couple holes and you switch to some other type of cutter, you have lost your center.
Either way make sure you clamp the peice down good. I'd also recommend keeping a peice of 2x10 clamped to your drillpress table to use for backing. Its soft enough not to harm your bits, and you can go ahead and keep drilling all the way through without worrying about your table. Its really a must if your going to be drilling witha anything that has a pilot that drills deeper than the rest of the bit.
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It'll feel better when it stops hurting.