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How thick is the inlay?
Carolyn
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"It's good to know, but it's better to understand." Auze Jackson
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The medallion is a full 3/4" thick to match the hardwood floors
~ Chris
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I made two 18" maple & walnut medallions for a customer who installed them tight and then finished at the same time with the floor. That was several years ago and have not heard of any problems. IMHO as long as the medallion and the floor are of similar material (solid wood), movement should be similar in both.
In your case, installing in a prefinished floor, I would not be as worried about movement as much as getting them at the same height. On the other hand, a black caulk ring around the medallion might act as a "high-lighter".
"I tried being reasonable..........I didn't like it." Clint Eastwood
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I assume the template relies on a standard bushing in the router? You could machine a bushing with a 1/16" larger diameter, or just wrap and glue metal shimstock around the original bushing till it was the correct diameter to give you the relief you desired..
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Thinking about it, he could get one of those multi- bearing rabbeting bits, and set it up for a 1/8" rabbet, and use that around his pattern to expand the pattern 2/3 of the thickness, then use his pattern bit to bring the other 1/3 flush and then he should have a pattern that will leave a 1/8" gap all around the inlay, which he could caulk and have peace of mind.
~ Chris
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I have done a lot of inlays in all sorts of materials and thicknesses.
On the CNC, I always offset to make the pocket 0.007" oversized and the inlay 0.007" undersized. This 0.014" difference is critical to getting a good fit. Without the offset, the parts simply won't fit.
I also tend to cut the pocket with a slight bevel so the top is wider than the bottom. The inlay is cut with a complementary bevel. This creates a scarf joint rather than a straight joint. This hides a world of sins in the fitting. It also allows for wedging the inlay like a cork to force a better fit.
For the size your friend is working in, a 3 degree door bevel Bit would work awesome.