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For smaller magnets I use pin vices, but how do you guys drill holes for larger magnets? 1/4 in and up?

I use a power drill.

just put some tape around the drill bit, and use your fingers
I find power tools to be masive overkill for modeling and it becomes too possible to wreck a figure.

Use your pin vice to make a pilot hole and work up in drill bit sizes untill the bore is the size you need. Its not heavy work at all.

Dremel.

Many people will tell you the same thing.

I use a small forstner bit and a power drill

I still do it by hand. Helps that I have a chunky pin vice with interchangeable collets, ranging from zero-closure to about 1/4". Even with the greater control of hand tools, I still start small and work my up through 3-4 bit sizes until I get my final diameter, if the hole is that large. All of my larger drill bits seem to bite much more aggressively than the smaller ones, so they tend to screw themselves into soft plastic unless I shave the walls away, bit by bit.

Were I to go the powered route, I'd still use a series of bits for the same reason, but I'd also prop my drill solidly on the table and move the model onto the bit, for the sake of increased control and stability. All the better if you have access to a drill press.

I use a small, handsized power drill for this works like a charm. Otherwise I'd use a dremel

Dremel with router-bit/s (on low speed)

I don't trust any kind of power tool ner my minis. I went to great lengths to get a pin vise that takes up to 3mm drill bits, if i need anything larger I do it by hand.

Oadie's right about them screwing themselves into plastic - you have to work up to the bigger ones in stages.

HairySticks wrote:
just put some tape around the drill bit, and use your fingers

This is what I do. I cannot stress enough the importance of taping the drill bit. You'll lose skin off your fingers if you don't.

I do the same thing as oadie. the chuck on my pin vice opens quite wide, so I can fit any sized drill bit I'd ever want to use for a magnet into it.

I've tried using a dremel, but I don't feel like I have enough control over it to put the hole exactly where I want it. with a pin vice, I have total control.

I use both a bit and my hands, or a power drill. If you start with a smaller bit and work your way up, you won't go wrong. As for using a power drill on plastic, its all about trigger control. You can control the speed with the amount of pressure you put on the trigger. If you aren't comfortable with a power drill, practice on sprues before you work on your model.