[asid61]

I think it depends highly on your bending equipment.
Personally I'm partial to sheet metal because it goes together very fast (put everything in place and pop in rivets), but if your bending tolerances are +/- 0.01", it wouldn't be suitable for bearings and shafts between bent walls.
Tubes are very easy to work with due to the integrated right angles and geometry and my team has used a lot of 2x1 and 1x1 (both 1/16" and 1/8" wall) everywhere. I don't know how much of an effect your waterjet's accuracy and taper will have, but if you want to be more careful you can purchase a 1.125" reamer and use that to finish all holes to a final size.
1.124" would let you do a light press fit, but those have to be bought custom to my knowledge.