[Gary Karr]

In addition to what Steve has provided, you do not want any selvage to hang out beyond your moldings. You can trim it and if you are worried about it coming apart and fraying, you can simply use a liquid white glue on the edge, which will keep it together. For your holes, simply use a hole punch that has the wheel with multiple sizes. These should be available at most hardware stores.
Now, regarding the side and header panels, after you install the windlace and your vertical windshield moldings, you will want to install the above windshield header panel. This panel, when put into place will help you position and tighten the headliner from front to back. You will want to do some pre-fitting of all of your upper panels against the headliner before you set the tacks completely so that you can tighten and loosen the headlining material. When you then put the upper panels into place, the headliner will then be smooth and uniformly tight all the way around. You will see that when you put the front upper header into place it will pull the headliner and tighten it. After you get the headliner where you want it front to back, you can install the upper side panels and similarly tighten the headliner side to side. It takes time but not impossible to do.