SMO, My lugs are made of soft steel. My pins are made of drill rod. They are harder, I haven't even had one to bend yet. Before and behind the lug is a long stretch of tough maple which keeps the pin from breaking, though I'm sure eventually the pins will split out the maple.
I'm sure drilling the holes oversize would not allow the barrel to move freely for any distance.
To slot I first drill a series of holes in the lug, they I use a metal cutting end mill in one of my reciprocating hand tools (dremel) to open up the slot. I finish with my swiss files.
Lastly I coat the end grain at the end (breech) of my barrel channel with accra gel. This gives the barrel something solid to push against.
When metal gets hot it expands. That is why we need to slot those holes.