Back onto the flywheels today.
The set of drill bits I have are Tin coated, so I could not flat the end as advised. As most of my drilling is probably in brass, I will buy another set and modify them.
Too impatient and the in-laws over, I needed to get on in the garage, so I continued with the drills I have. Taking the holes out very carefully in 0.5mm increments, I had no more problems.
I then reamed the holes to final size, and finally gave each one a tiny chamfer with a drill bit.
The wheels were then re-mounted onto the mandrel, and the chuck marks were skimmed off. The wheels 'rang' as I was doing this, and the result of this can be seen on the finish of the rims. Varying the speed had no effect on the surface quality. The picture looks much worse than it is, and a polish with emery paper removed this marks. The wheels are now slightly smaller (0.5mm in diameter, 0.2mm in width) than the plans ask. I do not think this will make any difference, but that will teach me not to turn to final size too quickly.
It can be seen in the picture that there are still some chatter marks on the inside of the rim. I can not get rid of these so will have to live with them. I will put the worse side inward when I assemble the engine so that they are not so apparent.
Finally I mounted both wheels on a piece of steel, pushed the bearings on the end, and held these in the lathe. Spinning the wheels by hand showed a minute amount of wobble on one wheel. I will wait until the engine is assembled to see how bad the problem really is before I start trying to fix anything.