I have been asked several times about how I cut nail nicks so I will post it here for everyone.
Most of the time I use a surface grinding stone on a mandrel in my mill to cut the nicks.
The stone I use is a Norton 7 X ¼ X 1 ¼ number 38A100-IVBE. I cut the nicks after the blade is hardened using this set up. You could cut the nick before heat treating if you wanted. I could not get a nick to look good using a fly cutter.
The mandrel was made by a friend to use with a surface grinding wheel.
I have in the past used a tool post grinding wheel with a ½ inch center hole and made a mandrel from bolt with the head cut off. Take a ½ inch bolt about 3 inches long and cut the head off. Use the type of bolt that only has threads on the end and not threaded all the way to the head. Put a plain nut on and then a large washer. Add the tool post wheel another large washer and a lock nut to hold it.
I have dressed the angle several ways and now use a sine dresser. I bought mine from CDCO Machinery for $90.00. (cdcotools.com) It is a lot safer and gives a better finish the other ways I tried. True up one side of the stone then dress the angle. I set my angle to about 50-55 degrees.
If you don’t have a surface grinder you can use the dresser in a mill vice. This is not the proper way to do this so try it at your own risk.
With the grinding wheel mounted in the mill I put the sine dresser in the mill vice (use parallels if needed) and tighten it down. I dress on the left side of the wheel as viewed from the front of the mill. Move the cross slide so the point on the diamond is a little off the centerline of the wheel downwind of the rotation. I lower the quill a little at a time and keep it locked while dressing the stone. The part of the sine dresser that holds the diamond nib will slide at what ever angle you used to set it. Go slow and take a little off at a time.
When I am ready to cut the nick I mount the blade to a plate and clamp it down. This is just a piece of steel with some holes drilled and tapped. I made some small clamps to hold the blade to the plate. I put the plate in the milling vice and line up the cutter where I want the nick. I have a spray bottle with some coolant in it to spray on the blade as I cut the nick. Now just cut the nick!
Craig
Most of the time I use a surface grinding stone on a mandrel in my mill to cut the nicks.

The stone I use is a Norton 7 X ¼ X 1 ¼ number 38A100-IVBE. I cut the nicks after the blade is hardened using this set up. You could cut the nick before heat treating if you wanted. I could not get a nick to look good using a fly cutter.

The mandrel was made by a friend to use with a surface grinding wheel.

I have in the past used a tool post grinding wheel with a ½ inch center hole and made a mandrel from bolt with the head cut off. Take a ½ inch bolt about 3 inches long and cut the head off. Use the type of bolt that only has threads on the end and not threaded all the way to the head. Put a plain nut on and then a large washer. Add the tool post wheel another large washer and a lock nut to hold it.
I have dressed the angle several ways and now use a sine dresser. I bought mine from CDCO Machinery for $90.00. (cdcotools.com) It is a lot safer and gives a better finish the other ways I tried. True up one side of the stone then dress the angle. I set my angle to about 50-55 degrees.

If you don’t have a surface grinder you can use the dresser in a mill vice. This is not the proper way to do this so try it at your own risk.
With the grinding wheel mounted in the mill I put the sine dresser in the mill vice (use parallels if needed) and tighten it down. I dress on the left side of the wheel as viewed from the front of the mill. Move the cross slide so the point on the diamond is a little off the centerline of the wheel downwind of the rotation. I lower the quill a little at a time and keep it locked while dressing the stone. The part of the sine dresser that holds the diamond nib will slide at what ever angle you used to set it. Go slow and take a little off at a time.
When I am ready to cut the nick I mount the blade to a plate and clamp it down. This is just a piece of steel with some holes drilled and tapped. I made some small clamps to hold the blade to the plate. I put the plate in the milling vice and line up the cutter where I want the nick. I have a spray bottle with some coolant in it to spray on the blade as I cut the nick. Now just cut the nick!

Craig