Actually, I mis-spoke myself. You drill the gear & blocks -- then tap the holes in the blocks. The gear should be clearance-drilled & the blocks drilled for tapping 1/4-20.

You are correct that the original holes are too large. If I'm doing a re-build of a crashed Nexstar, I just cut-off the snap-in buttons & use them as gromets to fill the hole & drill to size. You can also fill the holes with high-strength epoxy -- JB Weld is great.