I recently started doing this myself. I've made 5 sets of scales for folders. What I use is a Dremel 4000 and the Dremel workstation mainly. You will also need any cutting, sanding, buffing accessories you may need. Dremel also has a set of VERY small drill bits. I think they are 1/32" - 1/8".
(http://allprotools.com/dremel/dremel-62 ... t-set.html
The above web site is a great to buy Dremel products. The prices are as good as I've seen. Another place to get accessories is (http://www.widgetsupply.com/page/WS/CTGY/dremel-bit-set
This site has a lot of generic accessories. I wouldn't recommend the diamond accessories because diamond tools are either good or JUNK. I use them and for occasional use they are fine, but for long-lasting diamond tips I'd stick with Dremel brand. I'd do that with any of the high performance accessories like tungsten bits and anything dealing with very hard materials. But, for cutting wheels, sanding bands, etc. you can get great deals there.
The workstation for the Dremel holds the tool and acts as a drill press. You can also lock the tool in a position to cut and sand scale shapes. The only other thing I use is a coping saw and sandpaper. For buffing I'd suggest some better (finer) buffing compound. I use DMT diamond paste. Put it on the buffing wheels instead of the Dremel buffing compound. Dremel compound is good, just not as fine as you may want.
I take the scales off the knife and make a template using hard sheet metal. The template material needs to be harder than the scale material. That way it will be harder to accidentally cut/sand too deep into the side of a scale when shaping it. Cut out a template and drill any holes in it that are in the original scale. Then lay the template on the new material and cut/sand out the shape and drill all holes. I'd suggest using a smaller drill bit than the screw will need. If the hole is slightly off center you can use the drill bit to GENTLY round out the inside of the hole on the side than needs cutting. The Dremel workstation is a good tool for $50 but it is NOT a high performance drill press and sometimes the drill bit may slide off center. That is another reason for the template material to be harder than the material you are working on. It will help keep the bit on-line.
After all this comes trial and error. Lots of error on my part.
I do enjoy it and G-10 is very easy to work with. It cuts and sands much easier than hard woods. I haven't used a respirator but normally work right in front of a powerful fan so most dust is blown away. I also have a shop vac with the hose held right where the cutting is going on.
Pictures of two Manix2 knives.
This is actually the same Manix2 with black blade. I had the two colors on opposite sides of the knife for the pictures. I think both colors really look good with the black blade.
Notice the orange scale. You can see how I had to thin the G-10 thinner than the 1/8" G-10 material I bought. This was mainly to allow the lock buttons to stick out enough to grab with the thumb and index finger. Also, for the screws to be flush with the scales. This was one of the things you realize as you learn for various model of scales. I left the rear of the scales thicker to give the knife a little fuller feel in my hand. That really didn't make much difference actually. When thinning scales like this you need to thin the top of the scale so you keep the side that goes against the liners flat.
The G-10 I bought did not have any texture on it so they ended up smooth instead of the feel that the G-10 that Spyderco knives have. I think you can buy the textured stuff. The smooth G-10 still provides a very good grip but the texture is preferable IMO. I have the tan scales Manix2 and had the blue scales on it for a while but have put the tan ones back on because I like the texture.
That's all I can think of right now.