Darren,
Just to explain the charts.
As you show rightly, you were using the correct chart, ie metric coarse.
As shown in pic 1 below, for 10mm, if you subtract the pitch (only in metric), that will give you the normal sized hole for tapping. Shown in the green circle on the next chart.
So if you follow the charts thru, and find the one for 10mm (marked red 1), for a super tight fit, you would use the size marked red 2, for a free thread you could use the bottom one marked red three. The last one will hold, and if you have some very tough material you could use that sized drill so you can get a thread in, but it won't be as strong as the ones higher up the chart.
You are quite correct in your assumption and what Stew has said, you can reduce the size of the bar to get an easier cutting thread, and still remain in safe limits. You could go say to 9.3mm, but that would give you a weaker thread. If I was doing it, I would most probably go as low as 9.7 or 9.8mm. But if possible stick to nominal size and open up the die to cut oversize first.
Look at the hole size spread on the tapping chart, that is 0.7mm (8.4mm to 9.1mm). You can use that spread for external cutting. So 10mm down to 9.3mm.
The smaller you go, the weaker the thread. But try to keep one or the other at the correct size otherwise you might find you get a lot of wobble. That is why if possible, you should always make the external thread second, and by cutting oversize to begin with (centre adjusting screw fully in), then compressing the die down for the next cut (slackening off the centre screw slightly, and nipping up on the two outer ones), you can get the external thread to fit perfectly in the internal hole.
John