Yeah, I used a 1-1/8" spade bit too and it works fine. Also, many are using the same size hole for the joystick but I don't know for sure what's the official size. I have two different metal cp's and the hole for the joystick is 3/4". Wood might need a bigger hole because of the joystick travel (it's broader the higher up the shaft you go). Does that make sense?
Regardless, the black plastic washer will cover up either size hole.