The peg box is pretty much done. I used a 1/4" drill to do the inital material removal, then a small chisel to remove the remainder. I sharpened the 1/4" chisel several times, as it was in pretty bad shape when I started. After honing it, I found that I didn't even need to use a mallet, just leaning into the chisel was enough to cleanly remove material.
I took a Lee Valley all-day sharpening seminar a couple of years ago, but haven't used any of the skills I learned until recently. It's really just common sense, at least once you know how an edge actually works.
In the past, I've had problems with getting just the right amount of room under the E-string peg area for adequate string clearance without breaking through the bottom of the peg box. This time I was very slow in removing material from that area, and it all seems to have worked out perfectly. I finished the box by using machinist's files to smooth out the chisel marks.