Hi Tom,
you can buy special milling cutters to cut square holes, sounds impossible doesn’t it 
Check out this video and it will give you some idea of how it works – http://www.youtube.com/watch?v=_HSXQ1gFvhQ
http://bbs.homeshopmachinist.net/threads/28214-MW-article-about-the-Watts-Bros-floating-chuck This forum post will give you a bit more info too.
Paul.