To inlay a coin, or any other metal inlay it is best to use the actual item as a guide.
The edges of the item need to be filed so there is a slight taper going inward from the outer surface to the bottom. In the case of a coin that should remove any serrations that exist.
The angle should not be steep. A 1-4 degree angle will do nicely.
If possible, the inlay (coin) should be bent so it will lay flat on the wood in the area you want to install it.
When your ready, place one small drop of Superglue on the back side and press it against the wood until it sticks.
Using a pointed Exacto or similar hobby knife, held at a slight angle to match the filed edge of the inlay
place the tip against the outside of the coin. Press the tip into the wood. Then, move slightly around the coin and repeat.
You want to end up with a complete cut around the outside of the coin with no voids in it.
Remember, you want the exact edge of the inlay/coin to be guiding the tip of the hobby knife so keep it up snug against the coin.
If the wood is hard you may have to go around the coin at least twice until the tip of the knife goes in to a depth that is at least the thickness of the inlay/coin.
Once the outside cut is made, a light tap with a hammer/mallet will break the superglue bond and the coin will pop off.
Now, using the same hobby knife place the tip about 1/16" inside the incised outside cut.
Holding it at about a 45 degree angle so the tip will cut down into the wood and meet the incised cut at its bottom push it down into the wood.
A small chip should pop out.
Continue this until you have removed 1/16" of wood completely around the incised cut.
This cut will help you avoid damaging the precision incised cut you worked so hard to make when you use a chisel to remove the center area wood.
Your chisel must be razor sharp. Dull chisels will cause all sorts of problems.
Carefully remove the wood in the center area to a depth that matches the coin. You may have to try fitting the coin to determine this.
To secure the coin you can use a epoxy like JB Weld but soldering a short pin or needle to the back side will make a more permanent installation.
I
never draw around an inlay with a pencil unless it is just to keep track of where I will want to install it.
Relying on a pencil line and sight to create a precision cut with a knife is asking for trouble.
Follow this link to read more about installing inlays.
http://www.muzzleloadingforum.com/fusionbb/showtopic.php?tid/73337/post/74951/fromsearch/1/#74951