Go to theelectricbrewery.com and read their instructions for adding a spigot to a kettle. They have links to sources for a stainless spigot, washers, and o-rings.
I was fortunate to find a bit of the correct diameter for my spigot. I was not comfortable trying to use a step bit. Whatever bit you use, use plenty of cutting oil, go slowly, and dress the hole gently with a fine round file.