Thats how I started, and was never happy, as the hole punch tapered big to small, and it was impossible for me to match the angle of the punch with the angle of my blade, so the cut always looked bad.
Next I went with a forstner(sp?) bit, which at least made a straight hole, but still the blade would wander and waver when I tried to connect the holes. This was at least better, and O could run behind the cuts with a small drum on the dremel tool and straighten things out.
Once I started selling a lot of holsters, I bought a custom made punch from Weaver Leather and now I just punch the slots in. For the 80 or 90 bucks they charged, it has been worth 20 times that much to me thus far.