When spinning pegs in for initial fit, use soap on the shaft and look carefully for irregular wear pattern (from one pegbox wall to the next). Use 320 grit sandpaper to correct for irregular wear - that is, if one wall is tighter, sand that area on the peg shaft so that each pegbox wall bears the same amount of tension.
Finished distances from the peg collar to the pegbox wall are as follows:
D - 11.5 mm A - 12.0 mm G - 10.5 mm E - 11.0 mm
When approaching these distances be extremely careful: make small cuts with the reamer and check frequently to insure that you are not removing too much material from the pegbox. The reamer can be spun counter-clockwise in the hole so that rather than cutting away wood it is compressing the wood fibers and thereby enlarging the hole very slightly.
For initial fit, leave the peg collars at least 1 mm further out than the distances shown above and fine tune the fit as they are "spun-in". At this point (with the collars 1 mm further out than the finished distances) the peg shaft can be marked and cut off. Scribe a mark around the shaft on the outside of the pegbox wall, and cut off the waste with a fine-toothed saw just beyond the scribe mark. Use a fine file to slightly dome the end of the peg, rounding it over just to the scribe line. Sand\buff with successively finer grades of sandpaper up to 1200 grit.
When done this way, the finished level of the peg will be slightly lower than the pegbox wall. Liberal application of peg dope and a lot of "spinning-in" will generally bring the pegs in that last 1 mm.
Lightly buff the shaft from the collar to the pegbox wall first with 320-400 grit abrasive, then with 1200 grit polysand. With the pegs spun in to the box, and the excess peg dope brushed away, paint a small amount of mineral oil on the shaft from the collar to the pegbox wall. Loop a strip of soft cotton cloth around the shaft at this point and vigorously buff the oil into the shaft.
Locate the position of the hole in the peg slightly distal to the collar from midline on the G, D, and A pegs, and slightly proximal to the collar (from midline) on the E peg. Mark the locations with a scribe. Drill the holes with a ___ bit. Be sure to adequately support the shaft on the off side to prevent splitting when the drill breaks through. Pass a round needle file over the hole on each side (radially) to chamfer the edges of the hole and thus lessen the likelihood of breaking the string.