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I'd suggest simply using a hole saw and a jig saw would be sufficient. The key to using a jig saw for the straight cut is to use a saw guide on the jig saw, or an external guide support to keep the cut straight. You can either use a scrap of plywood clamped to the wood (if the width is sufficient, or make a jig (similar, but smaller, to the one described ...


The most likely solution is to create a template and use a router with a bit that follows the template. The router would also be used for easing over any sharp edges. photo credit, sample image, not a product recommendation

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