If you don't use a step bit, chances are you will screw it up beyond repair.
Well, not 100% true, just be costly to repair... A good machine shop would be able to repair the botched drilling...
I looked at step bits when I was getting ready to put the valves in my kettles... Freaking expensive (~$40 for a decent one, up to 7/8")... Luckily, I was going into aluminum, so a hole saw was a viable option (at under $10)... Got both pots drilled just fine... I will say that if you go that route, make sure you have a good file on hand to smooth out the edges. Or something to do the job. Otherwise, you could cut the O-Rings when you install the valve (I did that on both of mine, before using a wire wheel to get rid of the burrs)...
I would recommend testing the pots once you've installed the valves someplace where water flowing is safe (like the tub)... I did that to make sure they were leak free (took a few tries, and work, to get mine to that point)... Let them sit full of water for at least an hour and check for any leaks. Then do a boil test to make sure it's still good... Doing this before brew days will save hair...
I would also recommend getting some extra O-rings for the valves, in case you need to replace them when you're putting it all together... Just working from recent experience, since it was my first time installing these... The replacement/extra O-rings I got are thicker than those that come with the ball valves... Work really well too.
