So, in case you come to this in your search of the archives, here's an update. Drilling the holes was really pretty much a non-event. But, there is some information that may be useful.
In my case, I used a #10 Dexter axle. The tube on this one is smaller than the cutout on my 1968
Overlander. There is a little less than 1/4" gap. Other folks mention widening the cutout. I think that in these cases, they may have been using a #11.
Having been forewarned about the dangers of hanging up a 5/8" bit, I eased up on the juice as soon as I could see daylight through the hole. I also kept enough pressure on the bit to keep the revs down. So, when (notice I didn't say IF) the bit hung up, it was no problem. Just back up and ease in again at a sane speed. This worked even on the holes that partly overlapped an existing hole.
I did use the bur on one hole. But, the tiny slivers of metal that it produces are a real hassle. Otherwise, it's a nice alternative.
I also did check alignment BEFORE drilling. I was delighted to see that it was perfect with the first axle pressed against the rear side of the cutouts.
In summary, I had to drill two holes on each side. The only tricky bit was that one set overlapped existing holes.
BTW--when talking to an engineer at Dexter, I was told that it might be possible to get a blind (no holes) bracket from the factory. But, I expect it's at the discretion of whoever you ask. I basically forgot to ask when I ordered mine
Also, be advised that if you use your frame holes as a guide for drilling into a blind Dexter axle bracket, one of the holes will be obstructed by the wheel. For this reason, I think it's actually easier to drill into the frame flange. Keep in mind that the flange is added onto the actual frame. So, I don't foresee a significant change in the structural properties.
I will be posting additional information on 16 inch wheels, LT tires, and other provocative notions in a separate thread. I will put a link here if I can remember.
Thanks again to everyone who answered my question.