As mentioned, get a good step bit and you'll be fine. I would still do what you can to cool the bit, to keep it sharp. It WILL be easier to drill than stainless (by a healthy margin) so you'll like that part. I would go with a stainless ball valve setup when making a kettle. Figure out if you're going to use a dip tube and then place the hole to make it work.
I did this with two aluminum pots (making them kettles) before going on to stainless kettles/keggles.
If you are going to go with a dip tube, then I would get the valve with a simple 1/2" NPT to 1/2" compression fitting and then the dip tube with the delrin ferrule to match. Like this one for $22
(just add ball valve and o-rings and maybe a washer/spacer to help). I like the bent dip tube in my keggle, but it can work just as well in a kettle.