I'm going to a assume you don't have a mill.
A standard bi-metal hole saw will do the trick just fine. I have a 1" hole saw that I've drilled dozens of holes into steel and aluminum with. Run it as slow as you can with a good cutting lube. The main thing is to make sure you're not overheating and that your chips are evacuating and not galling up into the teeth. The teeth can be touched up and resharpened a couple of times, though the smaller saws are pretty cheap now days anyhow.
You can use a small sanding drum, or a dowel wrapped with sand paper if you want to clean up the inside. Just chuck it into the same drill you use for the hole saw. You can also get an appropriately sized reamer or barrel lap, though you may have to adjust the OD of the hole saw just a little bit, as they are not exactly "precision" tools. Don't get me wrong: They make a nice round hole, but it won't be within a .0001" of the saw's listed OD.
Also keep in mind that larger laps and reamers don't always have a small enough shank for a standard drill press, so you may have to get creative there.