The bigger the hole the better,, if you have your router setup to take on the 1 1/2" it's the best way to go if not the 3/4" or the 1" will do just fine,,,in that way you can use many bits,, like a plunge router over for just one of them..to do both jobs at one time so to speak..
But you want the hole as big as you can get it so the chips can get out of the hole easy>>> the size of bit can be just about anything you want to use..with just a little bit of setup time you are set to just drop it in and make the cut...you can also put a nice ring or two on the outside edge of the circle...
The guide is the key on this jig..
By the way once you crank the speed up you can use a 1/4" but I don't recommend it ,,now for thin stock you will not have that error,the slot likes to fill up with chips and the bigger bit will have less jammed in the slot,,to recut over and over, not to say anything about the heat, heat kills router bits...
The attached photo is from a template bobj3 made.
I’m curious why the 3/4” guide is used and not a smaller one. Perhaps there is a reason and that is the purpose of my question.
If you were to cut a circle, I would think that you would like to use a small bit like 1/4” or 3/8” with the corresponding size guide.