If you want to make wood plugs and plug the old holes you are welcome to use that method so long as it is done neatly.  However we find that the best method is to use Abatron WoodEpox putty. 
For new pianos it is the best method for making the old holes disappear!  Example of an epoxy filled hole using this method: Click Here

Scrape the surface edges of the holes to remove burrs or splinters.
Scotch Tape the back of the holes with one long peice of 3/4" Scotch tape
Scoth tape the surface of the sharps on the open hole side to protect the finish of the sharp.

Measure out:

20.0 grams WoodEpox part A (Resin)
17.0 grams WoodEpox part B (Hardener)

Note:  Abatron specifies equal parts of A & B but we find that adding a little less hardener
          slows gives better working time.

Dying the putty to match the key wood

Abatron supplies powdered brown and yellow dye which is used for coloring the putty to match the wood.
Without dye the putty is colored lighter than the wood.  1 ounce packs available from:    Abatron Dye Pigments

Use .5 ml or 1ml measuring spoons to measure out roughly equal portions of the brown and yellow. 
Experiment with proportions to get the result you want.

Once mixed, spread out the mixture to a thickness of 1/4" to disperse heat of reaction!

Cut off a section of putty and roll the putty up into a snake.   Then push the putty snake down into the hole with your gloved fingers while supporting the back of the hole.    (Do sharps separately as the mixture dissolves the black dye slightly and discolors the putty )

Leave the putty a little high.  This can be controlled by keeping the putty knife at a low angle.and drawing it across the top of the hole so that is squeezes it out slightly.  You can control the squeeze out by varying the angle of the blade.   When finished filling all the holes in a key apply tape to the cover the tops of the filled holes.

NOTE: Work the putty in the hole with pressure between your fingers pressing between the two taped sides.  This pushes the putty hydraulically into the wood grain.

The putty will harden overnight in a warm place.

Once hardened remove the tape and sand each side.   Scrapers can work as well. 

Micro Mark Mini Belt Sander is the best way I've found for sanding off excess putty after it is hardened:
If you order it don't forget the power supply and extra 80 grit belts..
These are not heavy duty sanders so I recommend getting two belt sanders.
When one starts to get hot switch to the other.

For capstan filling softwood keys:

Use Epotek #301

Mix

24 grams resin
6 grams hardener

Mix well, then add  2.3 grams West #410 microlite faring filler

For keys with hard wood insert

Fill the holes as described above, then make 1/4" cross grain hardwood plugs and drill out the holes to the depth of  the hardwood, then glue in the plugs.  Trim and sand flush.

Price: $54.90

Pigment - Dark Brown 1 oz
Price: $1.40

Pigment - Dark Yellow 1 oz
Price: $1.40

Available from:

Abatron, Inc., Dpt. Net
5501 - 95th Ave.
Kenosha, WI 53144, U.S.A.

Phone: (1-800) 445-1754 (within the USA only), or (1-262) 653-2000).

http://www.abatron.com/

Conservation Resources International, LLC

5532 Port Royal Road

Springfield, Virginia 22151

USA

Office Hours are 9:00 to 5:00 EST

Phone: (800) 634-6932

Phone: (703) 321-7730

Fax: (703) 321-0629

E-mail: sales@conservationresources.com

Conservation Resources (U.K.), Ltd.

Unit 2, Ashville Way

Off Watlington Road

Cowley, Oxford OX4 6TU

England

Office Hours are 8:30 to 5:30 GMT

Phone: +44 (0) 1865 747755

Fax: +44 (0) 1865 747035

E-mail: ConservArts@aol.com

PHONE 800 227 2201
   FAX   978 663 9782