I used my Makita Trimmer with a short 3/8" pattern following bit (this is from another build, with a longer bit)
You could use a Dremel with a flush router bit, but you will need to use a wooden template as the shaft of the bit is your 'guide bearing' and will melt a plastic/acrylic template in an instant.
Your other, safer, option is to plug the lug holes and then use a Forstner bit in a drill press to drill out the new lug holes. Clean, easy and less likely for things to go horribly wrong.
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