Your instinct is right - pine is just too soft for this, and I would expect the holes to splinter.

I used oak plywood, and it has held up well so far, including in our kitchen. You do get the occasional tiny splinter, but nothing serious.

The main trick for getting clean holes, especially on the back side, is to drill into a sacrificial board so the exit side stays supported.

If helpful, here's a close-up photo: <https://files.virpo.sk/pegboard.jpg>

Thank you so much, hope I can find a way to get this done!