When I’m installing dowels or plugs to fill screw holes, here’s how I prevent glue squeeze-out from soaking into the surrounding wood. I drill a hole the same diameter as the dowel or plug through a piece of thin scrap metal, and I tape it down in place after aligning it over the hole.
Then I spread glue in the hole, install the dowel and tap it home. Any squeeze-out that rises out of the hole around the dowel or plug ends up on top of the metal. Once the glue sets a bit, I lift the metal mask off to remove the excess glue. You can sand the metal around the rim of the hole until it’s razor-thin, which makes this trick work even better!
– Paul Guncheon