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For cutting larger circles, I have been known to use a hole saw attached to a power drill through thicker balsa. But generally I make sure I have a brand new blade in my knife and cut around a circular object of the right diameter - like a large coin or a washer. Be very careful when cutting cross the grain though as the knife tends to slip.
One trick that helps prevent tear out in soft wood is to clamp the wood to a waste piece and drill all the way through. The correct shaped bit also helps.
The spade bit will make a mess.
circle cutters and hole saws will remove too much material in the center
the compass cutter will work but I recommend round wooden bases for doors.
I have been planing some wooden buildings for Lake Town. This special wood burner tip will make quick work of texturing wood round bases. The razor saw blades are useful for odd shapes.
round shapes can be pressed into clay or green stuff. I like the idea of a custom brass punch for clay but I have never tried it with wood.
I made these strong enough for a five and eight year old in the summer 2012. I used PVC for the door frames. I made it so two could fit in a box.
I hope some of this was helpful. I am looking forward to see what you make.