The best way is to use a bandsaw jig, described below ... a circle cutter attachment for a drill or drill press or use a hole saw. You can even get a circle-cutting attachment for a rotary ...

This Kreg pocket hole jig ($40 at home centers ... Spread glue onto the dowels and cut the piece as flush as possible with a hand saw. Sand flush. Kreg offers solid-wood plugs (shown above ...