They do tend to crack, I don't worry too much about it if it happens since I'm filling it with epoxy any way. To try and avoid it I usually just take some extra time and just use my dremmel to open the holes.
Forestener bits and a drill press with a good vice on it should work well also.
Here is my favorite description of how to pillar bed for some added info.
http://www.6mmbr.com/pillarbedding.html
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