I just drilled out my ss brewpot last night. First, punch the location of the hole (you could use a hammer and nail). I started with a 1/8" bit at 3100 rpm, cooling with WD-40. I then went straight to the step bit and slowed to 400 rpm, again with plenty of WD-40, up to 3/8" or so. Then I slowed to 300 rpm, and slowing drilled up to 13/16". I kept the bit and workpiece sprayed down with WD-40 and checked often to make sure my hole was only as large as necessary. The drilling was smooth and fast, but requires a bit of pressure. A good, solid drillpress is very useful.
Once the hole was almost big enough to pass the threaded connector through, I stopped drilling. I used a dremel tool with stone to clean off the burrs and then a small sanding drum to smooth it out. Everything fits perfect, no burrs, and not discoloration from heat.
Slow your rpms, use steady and consistent pressure, use some type of lubricant, and back off after each step to cool the bit and workpiece.