What you need: Suitable gasket material (found in all the big box auto stores in rolls) and a small ball pein hammer (4oz or smaller), knife/scissors. I'm using cork in this example, but the same applies for a paper/composite gasket. This is my blower intake manifold if you were curious.

WARNING: When using this method against aluminum or plastic parts, extreme care must be taken to not damage the material. Steel isn't anywhere near as bad.

http://i192.photobucket.com/albums/z74/bkj110/DSCF0736.jpg

1) Cut gasket to rough dimensions, like so:

http://i192.photobucket.com/albums/z74/bkj110/DSCF0737.jpg

2) Hold gasket tight against surface, while using the ball pein to hit the gasket against the sharp corner of the opening, cutting the gasket to the opening.

http://i192.photobucket.com/albums/z74/bkj110/DSCF0738.jpg

3) Work your way around the opening (keep holding that gasket tight so it doesn't move!)

4) Finish the bolt holes the same way. Very small holes require a very small ball pein or a knife to finish. If you are trying to trim around a threaded hole, don't even attempt to use the hammer, you will wind up damaging the threads. Just cut the holes with a knife.

Voila!

http://i192.photobucket.com/albums/z74/bkj110/DSCF0739.jpg

couldn't use use paper and a pencil to first make a template and then cut out the cork so the risk of damaging anything is reduced to zero?

If you have the patience & graphite to do that & a thin gasket, sure.

IMO the pencil method doesn't work real well with large stuff unless you have a 4" stick of graphite or a crayon (or at least bigger than the hole you're trying to cut).

I have always found this method to be far more accurate & faster than the template/cut method, especially with a dense synthetic or cork gasket. They're too difficult to accurately cut with an exacto. That's my own personal opinion on having done it both ways.

I made that blower gasket shown & the intake to head gasket in less than 5 minutes, and they're dead nuts on.

I've used this method mostly on aluminum & haven't damaged anything, it just takes a little more care & attention to detail.