[asid61]

Just use the dials on the handwheels. Ordering a DRO is in your best interests, as they save a massive amount of time that is otherwise spent worying about backlash and tracking position. A "competent" machinist will not need a DRO, but it helps a ton for students who are learning. Add 0.002" or 0.003" between gear bearing holes to make sure that small tolerances don't kill the gearbox.
I usually just use a 1/2" drill, followed by a 3/4" endmill and then a 1" endmill to bring the hole larger, then finish with a 1.125" endmill. This makes a tight slip fit for 1.125" bearing OD, although not a press fit. You should always seek to retain bearings on a shaft with "positive" retention, which is things like shaft collars, screws, etc.

You will not usually need to make a custom gearbox. For drivetrain, I urge you to go COTS all the way to save time. For anything else, try using clamping gearboxes and bearing blocks from Vex, unless it's super heavy-duty. After exhausting those options, then, I would look into custom. Follow KISS principles in design when manually machining a gearbox.