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Never done this myself, fyi.

However, I am guessing that medallions are flat on the bottom. If you use a standard drill bit, you will have a tapered bottom on the hole you drill. With a forstner bit, you will have a flat bottom on the hole and you could glue your medallion right in. You would have to select the size of the forstner bit to match the medallion, and then drill it deep enough by going slow and checking along the way. Good luck with your project!
 
Forstner or cheaper and easier to locate a brad point. You will want to clamp the grip down and set the drill press to depth. Be super easy on my Mill Drill .
 
For Colt medallions, you need a 33/64" Forstner bit. You won't likely find one commercially available, so a 1/2" and some dremel work to the inside will do it for you. A drill press is good, a hand drill can work if you are steady and careful. here's a thread where we talked about it in depth at the 1911 Forum:

adding grip medallions - 1911Forum
 
I would go with the brad bit only because it is a lot less expensive then a blind hole bit. It will leave less of a hole to plug on the back side then a forstner bit well.
 
Well, at $7 for a Forstner, going into a more valuable pair of grips, I would not scrimp on the $3 price difference.

The Forstner will leave no different a hole on the backside than a brad point - in fact the only hold on the back is going to be the pilot hole you drill for both, so that's moot. And I dont' know why you'd bother plugging it - it's on the back side and immaterial when the grips are mounted. The other things a Forstner does better is make a flat-bottomed cavity, which is desirable here. I could easily see doing the job adequately with a brad-point bit, but were I going to buy a new bit for this job, the $3 for the right bit is the way to go, I think.
 

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