I was taught to rive them from a billet with a froe, then shape them on a shaving horse with a draw knife. We had a hole in the body of the shaving horse for different peg sizes. If it didn't fit, you took a little more off, but you never drove them through. I have heard of using a chamfered steel die however, but have no experience. Some have also used a table saw to cut the blanks, but the grain would have to be in perfect alignment to the cut for it to work.
I was also taught to always split any piece evenly in the middle to prevent the split from running to the thin side, as in making shakes. When splitting in the middle, the split should run evenly down the two pieces, provided you are working with a nice billet. I made some pegs from osage orange once, and that did not have straight grain. Was not fun.
