I had a drill bit also, but mine was questionable quality. Cast iron is really a bear to drill through without a drill press. You'll need a big drill with a big chuck and adjustable speed, slow it down to 400 to 600 rpm. You'll need some serious arm strength and a steady eye to hold constant pressure. I'm afraid the bit might try to jump around because of the oval shape, but your oval is not nearly as bad as I've seen on other keels. The idea is to get a very straight through hole, perpendicular to center line (square); this is critical. That's why a tapered ream is the ideal tool. Before you order that bit, I'd really try to find a local machine shop that has that ream and hopefully talk them in to doing the job for $30 to $50. Worst case, the drill bit may work. Generally speaking you always want to use cutting oil, but I didn't want to do that on mine because I didn't want any oil in the pores of the metal. A really good cleaning with acetone or Lacquer Thinner might take care of it, but I'd be pretty skeptical of getting it all.
Either way, once you get that hole reamed out to 1.25", take the new bushing and scuff the outside really good with 60 grit sand paper, nice and rough gives the epoxy something to grab. I waxed my keel pin with zipper wax and used it to hold the bushing square in the tube when I applied the epoxy. There are pictures of that in my thread. My keel pin hole was badly misshapen from missing material, yours is not nearly as bad.
