Do yourself a huge favor and just buy a prop ballancer.
Unless you have a precision mill, and can cut an axle to less than half a thou. you are best to just spend the $20-30.
Prop ballancing is not something you want half assed. It needs to be perfect. Every part of your driveline will wear quite quickly if the prop is out even a tiny bit.
As for how its done, thats the simple part. Material is removed from the heavy blade (usually on the back side) untill the prop will level on the ballancer in any position.
There were some good instructions for getting a perfect prop on Jeff Wholts website, but it seems to gone.
If anyone knows where it is please post a link.

Peter