Seconding Bill's method, we did that on our tank, the wood template was a big help, and we did use a diamond hole saw.
Yeah, I've heard that, as well, and it makes a ton of sense (otherwise the bit would be wandering all over the place).
Once you get it started, though, it should be pretty smooth sailing.
I've seen people make "dams" or "bowls" out of plumbers putty; they score the glass using the bit (probably using a "guide" or "jig" (such as the wood block with the hole in it)), cooling it with water as they go (duh), then they roll a "tube" of plumbers putty and put it around the area they wish to drill, creating a little "bowl". Add water, drill, keep adding water, etc...
I really SHOULD try it, I just need to get off my arse... I have some 10's that might be candidates for sacrifice...