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Mart, I am planning to make a drill guide to keep the bit square, and will go thru the flywheel. The tap drill for a 12mm x 1.25 is a 27/64, which is .422". The pitch diameter on the 7/16"-20 is .405", so I'm only removing about 8 thou all around.
This is an 8BA, so chips will just fall to the floor. I have the offending hole on the bottom.