7/8" is the correct size, I have and can personally recommend the 'Greenlee' brand hole-saws, they are marketed to electricians / conduit installers, and ours has drilled quite a few shank holes through a large variety of materials and keeps on performing. If however you are only drilling a hole or two, you can get away with the flat bit style if you are careful.
It is important to long term stability to not make the holes too big, the 7/8" holes are the perfect size where the shanks just fit through, maximizing your pressure surface around the shank to hold the faucet steady.