I am new at this so I don't know what to expect and I need some advice.
I know that this is woodworking and not precision stuff where you want
0.001 inch tolerance but I am getting some really bad results.

I am trying to drill some shelf pin holes using a PC plunge router with
a 1/4 inch carbide spiral bit, a 1/2 inch to 1/4 inch collet reducer,
and a shelf pin gulde. I clamp the guide to the work to make sure that
it doesn't move while plungeing the router, and I have cleaned the
collet holder and collet. Here are some measurements I made: the router
bit diameter is right on the money at -0.0005 inches. I used a dial
indicator to measure the wobble of a piece of drill rod to be 0.002
inches at a point 1.75 inches from the collet base, which corresponds to
the tip of the router bit when it is installed. This should give a hole
about 0.004 oversize, right? The holes actually measure about 0.005 to
0.007 oversize. No big deal, after all this is wood. The shelf pins
measure about 0.003 to 0.004 under size. So here is the problem; holes
too big and pins too small make for around 0.010 slop in the fit of the
pins. Is a loose fit like this normal or can I do something to get the
pins to fit better. I know that the pins will not fall out when the
shelfs are placed on them, but the very loose fit of the pins bothers
me. Should I worry about this or not?

I can actually drill a better fitting hole using a hand held drill and a
1/4 inch forstner bit, but then I lose the placement accuracy of the
guide. Any suggestions?

What is a normal value for router bit wobble? is 0.002 too large or is
it about normal?

Thanks for any advice.