1" will work fine. There will be some slack since the shank diameters are actually 7/8" or 15/16" (i don't remember exactly), but it won't be any big deal. You can use silicone to seal, but it really won't matter.
on my kegerator, i used a 1" hole saw and used aluminum tape to line the inside of the hole to prevent the foam from crumbling. the aluminum tape used up the extra slack in the hole and the shank fit perfectly.