Drill a starter hole with the largest drill you have then,
using an adjustable boring head, take a series of cuts until you open up the hole to the size needed - boring heads can be purchased from Enco farily reasonable in price. I bought one of the really cheap ones and it has been working fine.
You could make a fly cutter ( a round tool holder that can hold a 1/4" tool bit (the kind used on manual lathes - usually HSS). Then bore a hole, move out the tool bit a little, bore again, just like with the boring bar, but less accurate to some degree.
A hole saw may also work, but I don't think using a 3" hole saw will give you a 3" hole accurate enough - you would still need to finish bore it - so use an undersize hole saw to create your rough hole.
Hope this helps a bit!
Originally Posted by Aegeon