I like the multiple hole method, and with a nice small 'Bosch or equal' hammer drill, I'd go with 3/8" bits and make it quick and easy. Not a job to play 'Magilla the Gorilla' on, slow and steady wins every time.
Make the hole big enough the first time for a thimble of appropriate size.
Here is a PS: leave the damned thimble out a 1/4 to 1/2" when you are done. You need to screw the stove pipe into it in at least three places, so give yourself some room to do just that.
Sure, I'd love to 'core' every hole, but this way you won't spend $20.00 on two SDS bits and a 25.00 rental of a small hammer drill.
I have not used a small diameter diamond wheel myself, but if you go that route, let us know how it worked. (Hard to make a round hole uniform, IMO)