Ive done that with larger holes, its nice being able to dial in whatever size hole you want.
That 5mm compression looks good. Would you feel confident doing an entire profile cut of nested cabinet panels with it?
I think it should work, feed/speed/depth if cut will be the deciding factor. Ive never used that one but I have used 1/4" for that when I started. I have a 3hp spindle and ran the 1/4" compression bits at 12,000 rpm, 250ipm, 3/4 doc. I would start at 200 ipm and .375doc. Im assuming 3/4 plywood. Keep in mind they will flex so depending on your software I would run a seperate lase past shaving off the last .02" or so to get the final size. What I do now is climb cut the first passes and then conventional on the last pass with zero offset between the two. Any bit deflection will make the part bigger than intended and the last conventional past shaves off the deflection to the finished size.
Side note on compression bits. The first pass depth needs to be greater than the upcut portion of the bit or there will be the same tearout as an upcut bit.
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I drill 5mm holes in alum with a 3/16" o flute profile inside cut.
in wood I use a 1/8" bit.