Uh, no, they really, really don't. Look at any number of baroque or romantic small guitars, or any modern flamenco, and you'll see friction fit pegs in solid headstocks. You need a tapered reamer to match the peg to the wood, and preferably a fairly tough, solid wooden peg (boxwood, ebony) slotting into a slightly softer wood that helps bind it in place.
This works reasonably well for gut or nylon strings (lower tension application), but if you want modern tuning stability with higher tension steel strings, just use traditional tuners, like doug says.
How come Nylon strings are lower tension? Nylon strings are usually a bit thicker, wich to me spontaneously makes it seems like it would need higher tension for the same pitch.