Hi, I'm not familiar with the W20 collets of which you speak, and I'm not sure whether the keyway's going to be just for clearance or drives the shank, but...
A carbide endmill would probably cope, and would let you bring the keyway close to the back of the ER chuck - high spindle speed, light cuts, plenty of coolant? I think you're right, HSS would struggle!
If not, have you considered grinding rather than milling the slot? If the 20mm shank can be released from the chuck this might be the best way to go, the keyway can be cut right to the end of the shank if necessary (more likely you'd just need to come as far as the rear of the chuck body). A Dremelloid with a 4mm thick mounted Alumina wheel would probably do it if you can arrange holding it

Dave H. (the other one)