Yes...drill into the pipe, holding the drill straight and level. Since the final pipe goes up at an angle, you effectively drill into the bottom of the pipe.
Look at this page to see a diagram of the muffler:
http://650ccnd.com/slash.htm
This is where a 7/8" drill bit would work better as you could start slowly, drilling straight in and opening a "hole" in the bottom side of the pipe. In fact, it will be more of an elongated hole, so to speak.
The 7/8" drill fits the inside more closely I think where as the 1/2" drill bit doesn't. And because of that, I pried up on the drill to force the smaller bit to cut into the pipe and wound up cutting away some of the top pipe where it exits the cone. No big deal since some high temp paint masked that pretty well.
I didn't go out and buy a 7/8" drill bit that would fit my 1/2" drill as I figured I would never use it again plus cost.
I'm pleased with the result as the bike doesn't have that "tinny" sound that comes with the 3 hole mod.....at least that's my opinion!