Here's a quick run-down of how the make-hole tool works.
1) Make a cube, and scale it up a little bit.
2) Go to Polygons > Make Polygon Tool; in the side, front or top view, draw a diamond shape "on" one of the cube faces. Be sure to make the diamond smaller than the actual face.
3) Select the polygon you just created, and translate (move) it so that it is near the side of the object.
4) Select both the cube and the polygon and combine them (Polygons > Combine)
5) Go to Edit Polygons > Make Hole Tool.
6) FIRST select the face of the polygon you created, and then select the face of the cube you want the hole to be in. Press enter.
You may have noticed that some of the geometry shifts its position to accomodate the geometry. If this does not happen the way you like it, go to the polyMergeFace node in the history, and change its Merge Mode; it's pretty straightforward what each one does :p
Knowing this will help you to create your holes in your buster sword.
You don't have to create a "perfect circle" yourself with the create polygon tool; make a poly cylinder, and set its subdivision caps to "0"; delete all of the faces of the cylinder EXCEPT for one of the caps. Move, scale and rotate it to get it to the right position, size and angle near your sword, and follow the instructions as above, and boo-yah...hole ^_^
Just a warning, though; in Maya 7.0, you will not be able to use the spilt polygon tool to create edges that have to do with a hole. You cannot begin to use the tool on an edge of a hole, and you cannot end the tool on the edge of a hole. Deleting your history will not cause Maya to forget that it is a hole.