I'd personally go for bang on, that way you get more even, and better clamping force. The more undersize/oversize you go, the more the collar has to deform to clamp, resulting in a less uniform clamping force on the spindle.

As for the slot, if you get it bang on, then a hacksaw blade cut should be more than enough, and if needed wedge the slot open a bit with a plain screwdriver until you get the spindle in.