1" with a twist drill?! Good luck with that! I have a mag drill for that kind of nonsense, that will put a 1" hole through 1/4 plate in about 30 seconds with no pilot hole. Perfectly perpendicular every time too.
This wil tell you everything you could want to know, although it been covered pretty comprehensively here.
http://www.waybuilder.net/free-ed/Resources/Trades/Indust/machinist01/FundamentalsOfMachineTools.asp?iNum=48
The main benefit of cutting/tapping fluid is to cool the work piece and cutting tool. Fluid is a better thermoconducter than air, any fluid will do, even water.
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