I am SO anal about this... I can't STAND holes that are not perfect. I don't make world-class folders yet, but I've got holes down pat. So here goes. (It's not that hard and makes the 'Monk' in you happy)
General Rules:
1. If your holes are not round your drill is too fast.
2. Don't start your holes with a center-punch followed with a jobber bit.
3. Don't force a dull bit
4. Always use cutting fluid no matter what anyone else says about it. A fluid cut hole will have tighter tolerances and your bits will last several times longer.
Your motto: Drill straight, sharp, slow and cool.
Setup:
1. Get a dial indicator if you don't already have one.
2. Mount dial indicator on your drilling/milling table.
3. Place a piece of drill rod, a chucking reamer, or high quality bit in your chuck.
4. Adjust dial indicator to ride on smooth shank of rod/reamer/bit.
5. By hand-turning arbor, verify that rod/reamer/bit runs true. Re-chuck the rod a few times and test each time. If you have more than 0.002" runout don't proceed until this is fixed (bad bearings? bad chuck? cheap junk?) I have my rig adjusted down to ~0.0004" on the drill shank (HF mini-mill).
When you can chuck up a rod/reamer/bit and it turns true proceed to the next step.
6. Remove the magnetic base from your dial indicator stand.
7. Adjust indicator position on the two rods such that you can chuck one rod up in your press/mill and the other rod extends horizontally with indicator pointing down toward table. Adjust so that indicator can be swung around the periphery of the table like Bruce's 'Z' wire test. Changes in indicator reading as it moves in a circle around the table (Turn by HAND!) will indicate if table is true or not. I use aluminum foil (smooth out the wrinkles!) as shim material and adjust until there is no more than 0.002" (count those zeros) variation across the entire table surface. (See I said I was anal) A flat table is important because not only do you need straight holes, but if the table is off of true then if you move your workpiece between drilling operations your bit will never be lined up with the pilot hole. They will be at different angles.
8. Now that your quill runs true, and your table is true it's ready to start drilling.
Drilling:
1. Start with an appropriate sized starter bit. There are spot drills, step drills, and combo bits. I like to use
these starter bits with combined countersink.
2. Put a drop of cutting fluid on the piece to be drilled and with apropriate speed and pressure start the hole.
3. Stop drilling before the shank of the bit past the countersink reaches the material. Your hole should NOT have any portion of straight side yet - it should be countersunk all the way to the top of the hole. If the countersink is recessed in the hole you went too far.
4. Switch to a machine drill (short shank drill bit) or a jobber. At this point you can pilot drill the hole with a bit the same diameter as the nipple of the combo bit, or you can go right to a bit the diameter of your starter bit shank. You'll have to experiment with technique and materials to find what works for you.
5. Drill through the material with the bit you have selected.
6. If you piloted the hole in the previous step now drill with your final bit which should be the size of the shank of your starter bit.
7. Carefully countersink the rim of your hole with an appropriate countersink tool. I typically do this operation by hand only just removing the bur around the lip of the hole.
8. Ream the hole to final size at moderate speed and quick feed with a lubricated chucking reamer. Reamer is not for hogging. It should remove very little material (sorry I don't have my Machinery's Handbook handy for exact specs. I'll look it up tonight and post back) For some this is the final step. For the ultimate hole do this step with a 0.001" undersize reamer and go to step 9.
9. Using a brass barrel lap (less than $10 from MSC) and fine diamond paste lap your hole to final size and internal surface finish. Brass barrel laps are adjustable and with patience you will end up with a hole with tolerances tighter than can be accurately measured in the home workshop.
If your bit chatters durring any of these operations you are spinning it too fast. This is the biggest problem with most drill presses.
The above steps were taught to me by Don Robinson (tool&die maker, teacher, and knifemaker extrordinaire). The optional step #9 I got from the amazing Johny Stout.
-Ben M.