The way I did it was to cut the covering away from the slots before using the covering iron to tack the covering down. This left a small exposed section of balsa around the slot, but I don't expect it to be a problem since the CA you use to glue the hinges in will wick into the balsa and fuel proof the exposed wood. I'm considering adding a covering strip to the hinge gap anyway to improve the aerodynamic performance (The gap is already pretty small, approximately 1 pin diameter). It was easier to trim the covering before tacking it down, and the hinge slots are so thin I didn't expect to be able to accurately locate them through the covering. I also didn't want to cut the surrounding wood fibers.

Brad