You absolutely have to keep it wet. The problem is that if it heats up, the bit starts to flake and lose the cutting bits and it's garbage. I always trace my hole and park in under the hose outside (on low but steady flow) and make the actual pilot hole by making a lazy circle (not just ramming the bit straight down, otherwise if you slightly bend the Dremel you could break the glass). Once you're through, just start working your way around and 'saw' the bit up and down. You can actually use a lot of force if you keep it cooled.
I used a diamon coated bit. As far as I know diamonds are the only thing used for cutting actual glass, though I could be wrong.
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