Not illegal but not a good idea.
I could see the little .22 tool by Paco working since the .22s generally have such soft lead and the case crimp is pretty severe considering it’s size.
For most cartridges …attempting to swedge a bullet into a different shape while it is still in the cartridge is a really bad idea… unless you want to risk severe chamber increases from inadvertently sinking the bullet deeper or deforming the side if you hold it tight enough to prevent the former... So don’t bother trying to make a tool for the bigger stuff.
On the original question…
Cutting or drilling on a loaded bullet = some risk of POW! , "OUCH !", "Where’s my finger?"
and … you will end up with an inferior product due to the inaccuracies of drilling(even with one of the little drill guide tools they used to make for doing this). Boring the hole with a lathe would solve some of the problems but not all.
In low velocity pistol rounds, small inaccuracies in the bullet’s center of gravity wouldn’t matter much … but … there isn’t much point in having a hollow point at low velocities.
Decreasing bullet weight and keeping powder charge constant decreases chamber pressure except in very rare instances of extremely light powder charges.
If you want cheap hollow points you might want to consider reloading .
