You can use a Forstner bit with a block of wood with hole already cut in it for the bit to ride in. This will also help align the bit straight. As far as cutting dowels, you can use another long block of wood with a hole the size of the dowel. Measure off the length of the plug, and saw a kerf through the block to the bottom of where the dowel rides. Slide dowel to end of block, saw through it, and push cut dowel out which sets up cut for next dowel.

 

I need to hand hold drill a clean straight hole and plug it with a dowel.

A forstner bit works great but .......
only if I can use it in a drill press, which I can't.

Note: this is just an example work piece to help the pic out.

I have a pilot hole drilled, see position #1,
then I screw it using a wooded washer #2
and the 1/2" birch ply panel gets glued down.

#3 is a forstner bit used in a drill press,
notice the oh so clean hole.
this is even with the pilot hole ....
but with the pilot hole the center of the forstner bit
has no place to center on so it walks around marking up the panel.

#4 is my hole plugged with the 5/16" dowel which is 1" long.

#5 is using the drill bit shown ...... it is dull ....
and you can see the ragged hole edge it leaves.

What kind of 5/16" bit can cut a clean hole
with the prior pilot hole already there?

====================
Dowels, I need to cut them.

I thought about cutting them as I install them.
I have a flushcut saw and the multi tool ......
they both leave marks .....

so I want to pre cut plugs and push them in but
I get ragged edges and then have to sand them down.
Notice I used the table saw to cut these examples.

How can I cut them cleanly?

This is for both cosmetic and strength of the joint btw,
even though the panel is already glued down.
========================

Drilling Jig.

I don't want to hand hold drilling these holes,
I can't keep it straight!
So I thought about what jig or stand could help?

I'm doing this on a flat panel
so all the pics I see of doweling jigs don't show that.
I thought about a mini drill press but can't find one.

Lee Valley has all kinds of jigs .....
Dowelmax, Kreg, the "Versatile Drill Guide" (which I'm leaning toward right now)
Rockler has their version too.

I have one of those drill stands but it doesn't work all that good.

if you are cutting on your table saw it look's like the blade is around 50 teeth?? the more teeth the smoother cut, or your blade is dull ? try cranking the blade all the way up you will get a better cut , now watch it their is more blade up now.

 

Scroll saw with fine blade does great cutting dowels. Clamp a stop block for length and have at it.

 

If you start the Forster bit a few mm before the pilot hole, you will be able to hand hold the Forster bit to finish the hole.

A sharp brad point t bit will cut pretty clean.
Tape around a dowel may help avoid the tear out.
The tear out is often from the back of the blade so pulling the dowel away from the blade before the back passes can help avoid tear out. Scoring the cut line with a sharp knife or chisel can prevent the tear out.
Resizing the dowel in one of the dowel formers like veritas' new one or others can clean a dowel.
Good luck.