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I'm tempted to say, dog holes should be in the backyard, most likely near a fence post or in a flower bed
Seriously, my Sojberg has the dog holes 1 1/4 in from the edge and I love them right there. I've seen plenty of designs that have the dog holes 1 board in so that you can rout square holes before gluing on the last board. Lastly, I wouldn't put a dog hole 5 inches in as I would feel I'm reaching to far to plane.
Pat
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Here's some thought from CS on the subject.
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Location: Bowie, MD
George
if it ain't broke, you're not tryin'
Quando omni flunkus, moritati.
Red Green
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1.5 inches from the front of the workbench is where you would want them when using a hand plane.
I hear often from woodnet members that they wish they placed their dog holes closer to the front. I have never heard anyone wish them farther back.
WoodTinker
I agree with the recommendations to put your dog holes close to the front edge of your bench. I wouldn't want dog holes further than 2" from the front edge. I gather you are concerned about lining the dog holes up with the center screw on your vise. While this placement would be ideal, I think the location of the dog holes in relation to the edge of your bench is more important. Take Chris Warner's advice and add a stout wooden chop to the moving jaw of your vise. Drill it for a dog that lines up with the ones in your bench. The hole will be off center a couple of inches and you may get a little skewing of your vise jaw, but it should be minimal. You actually need very little vise pressure to secure stock to your bench top between the dogs, especially with thin stock. Too much pressure will bow your work piece and cause grief.
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Line them up with your vise(s), yes, but also consider your holdfasts (they should also reach the bench front).
Too many holes is also a pain (small part traps). I had to fill in 2/3 of the ones on my new-to-me bench. You don't need zillions apart from a front line associated with your end vise/wagon vise etc. IMO.
As to racking, make yourself one of these out of some paint stir sticks:
In Japan, there's probably a WoodNet equivalent where they're debating about Western chisels being a lot like Japanese plumbers. - AHill