See this on Nominal Pipe Size:
http://en.wikipedia.org/wiki/Nominal_Pipe_Size
Another source
http://www.harvel.com/pipepvc-sch40-80-dim.asp says that the dimensions are .84" od and .6" id.
The key thing to remember is that on a 1/2" nominal schedule 40 PVC, there will be no measurement of .500 inches.
Although the rules say that you may use holes for mounting, you can't put a connector through the interior of the tube. This is because the flag pole itself is wrapped in tape to keep it in place better.