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What do i use to drill a hole in steel door for the knob?
I got a hole saw, but the steel (tin) will destroy the teeth on it.
I know the inside of the door is wood, but the outer covering is
metal. The only way I can see is to drill about 50 small holes around
the needed circle size, but that seems like a pain.

Any suggestions?

Use a better hole saw. Good ones will cut metal all day long.