drill the buttons hole 1 1/8"
Drill the joystick holes 1 1/2"
The little floppy cover for the joystick will cover up to a 1.5" hole. If you drill too small of a hole, then you run the risk of hitting the joystick shaft on the wood and limiting the joystick action.
If you use a metal CP, then make a smaller hole for the joystick. Wood, use 1.5"
As far as spacing goes, I use 1.5" center to center for the buttons, and it leaves about 1/8" in between the bezels. If you leave more spacing for that with a SF2 style layout, then the buttons are too far apart and become uncomfortable to play.