"sinister" wrote in message
...
I need to remove some deep-set nails. They're the type without large heads,
and they look like they must have been placed with a nail gun, because the
heads are (say) 1/8" into the wood.

One method I thought of was some kind of drill bit that would drill out a
small circle, except it would have a hole where the nail is so the bit
wouldn't press on the nail itself.

I have one of these nail pullers. You use the handle to hammer the jaws in
alongside the nail, then pry to the side, grabbing the nail and pulling it out.

http://tools.idoneos.com/index.php/306228/nail_puller

Read the reviews.