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This can happen for a number of different reasons. First off, my guess would be that you are using regular drill bits, which is okay, but they have to be very sharp. If they arn't sharp, then the chipping is inevitible. My first pick for drilling eyes would be a forstner bit. You can go to Lowes and get a set for about $20. Forstner bits not only cut a clean hole, but they also leave a flat hole to set the eyes in, rather than the rounded hole that the regular bit uses. I also like the forstner, because they are easy to drill exactly where you want, instead of the regular bit which will wander.
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