Use 4.5 mm or 4.75 mm drill to drill the hole and use 1/8 tap for the thread. 5 mm drill will be too lose for the 1/8 thread. To tap the required thread, the hole is always 1 or 1.5 times smaller than the orginal required thread. Be careful during drilling the hole. Make sure you drill a stright hole and do make the hole bigger than the size of the drill bit used. This will cause the thread loosen. During tapping, make sure you turn forward and backward, so that the cutting is loosen out and not jammed your tapping tools. Make sure you apply lubrication or oil. If the tap is jammed do not force it forward. You may break the tap tool and stuck inside the hole. It is not easy to removed it out. Have a good time Tapping.
Oh.. There is one more things I forget to mention. Inside of a set of 1/8 (a box) of tapping tools, there is 3 pcs. If you look at it, it looks like the same size. Actually it is different. After drilling the hole, start with the first tap tools follow by the second tap tools and finally follow by the third tap. This will slowly increase and enlarge the tapping hole to the required 1/8 size. This you will get a better thread in the hole. I think the tap on the most left hand side the the first tap and the most to the right hand side is the last tap. I think your suppliers can help you regarding the tap no:.
According to my 'Engineer's Quick Reference Calculator', here are the specs for your 1/8" Pipe Thread. Effective Thread Length: 0.264" Threads per Inch: 27 Outside Diameter: 0.405" Tap Drill: R(which is 0.339") Also a good lubricant to use for tapping is Acetone, it does the job and doesn't leave the mess that oil does.
Grease Nipple Hole
