The surrounding handle material will expand slightly. It will take no more than upsetting the pin ends .020 or more to create a strong mechanical bond if they fit well in the first place, and especially if everything is epoxied as well. This amount of heading should not split the wood. If it does, well, that's part of the learning curve.
As Leeth says, peening after epoxy is a good idea. I do it either the way he described, although I epoxy the pin and peen it before curing, or one other way. I'll make the entire handle and glue it up with straight pins, as if I meant not to peen them at all. I'll shape the handle up to 95% with 60 grit wood belts. The peens are at this point glued in and ground flush, the palm swell will be defined, and the handle for all purposes shaped.
At this point, I go to a domed stake in the hardy hole (a vise would work) and, centering a pin on the dome (underside of the handle) I lightly peen the top of the same pin with a small ball peen. It does not take much, starting at the center and working out around the sides, to flare the top of the pin just a bit. It should not come out of round discernibly.
The only skill involved is that of keeping the bottom end of the pin you are working centered on the dome stake below. You don't want to slip off and be denting the wood around the pin with it. It's easy to feel and hear when the pin is supported by steel though, and the blows involved are very light so that if the work does slip, as long as you are aware of it, no real damage to the handle should result.
After I've peened both sides of each pin, I go to the grinder and continue, usually stepping up right away to 220 grit, to smooth the handle and refine the scratches. The pins come clean right away, but not enough material is ground off to remove the slight flaring that has been done.
The benefits of this way: Pins are epoxied too. Pins are mechanically trapped. A complex handle contour can be easily peened this way. The pins are held in place already by glue, no falling out, no fuss, no muss. No wet epoxy to deal with while peening. Pins do not have to be cut to a certain length, and the ends cleaned up, before peening. They are shaped right along with the handle, before peening. Handles on knives known to have straight pins can even be retro-peened this way.
I think that a common misconception with new makers is that a large head, like a rivet, needs to be peened out. I would say, not so. If you go too far, the edges can split, the wood can split, the head become noticeably out of round, the pin itself can bend, etc. I think of it more as if I am peening a bolster on- just a bit of upsetting/flare at the pin end is all it takes.
I do feel more secure when using stabilized wood, for several reasons, less likelihood of splitting being one of them.
Where to get a nice domed stake for your anvil or vise? I made mine out of a railroad bolt. If you walk tracks, you'll see that many of those 1"x10" bolts are domed on the top already, and only need a little cleanup and polish. I ground flats onto the bolt shank, which will locate it in the anvil or vise. BTW, find one that is NOT in the process of holding track together! Or ask some track workers.
