1: drill about 1/8." Use a bit about 1/32" bigger than the dot. You don't want to drill so deep that you hit the truss rod, but you have to go deep enough so that what's left of the dot won't resurface when you sand the board.
2:You can use any sawdust you want. Buuuut if you want it to even resemble the same color as the board, you'd better use dust from the same type of wood the fretboard is made of.
3: Use epoxy, not super glue
4: You realize if you want to put a new inlay in, you're going to have to remove all of the frets and then refret the whole board, right? Another thing...you are going to have a very difficult time routing for inlays on a radiused board. It can be done, but it's no cake walk.
Depending on how much experience you have with guitars(and I mean working on them), this may be over your head. But hey, it's your guitar. That's about all the advice I have.