I am using some coat pegs that measure 0.493". That is a pretty sloppy fit in a 0.500" hole, but other than hoping I can find an undersized drill bit, I am not sure what to do about it. ...

Try using a "fox wedge" --- that's a concealed wedge in the tenon that
expands the tenon to jam tight in the hole. Only make sure the wedge
doesn't bottom out and prevent the tenon from seating completely.

A couple of hints: Saw a slit in the tenon across the grain for the
wedge to fit into ... Don't make the wedge from a hard, brittle wood
like cherry. Use a wood that will give and compress slightly. I find
red oak works fine.