I would not worry about oval peg holes as being the primary problem with fit up after air drying. With green boxed heart wood, checking results in displaced and rotated surfaces. To help with fit up, hollow shoulders and abutting surfaces with a slick. I think you could bore the mortised stick but let the tenon alone until fit up and then draw bore. If oval bores are a later concern a few quick swipes with a block plane makes an oval peg but a normally shaped tapered peg may work without problem.

Norm:
Most likely your small sticker didn't allow enough air flow through your stack. And the moist air just sat in there and that's what the blue stain needs to help it grow.
Increasing the size of the stickers should help. There are safe chemicals that you can put on timbers to stop mold and fungus.
If you go to the www.woodweb.com and do a search of their knowledge base there should be lots of information about fungus and blue stains.
Good luck,
Jim

Norm,
A borax and water solution will stop the fungus growth on the timbers. You do need air flow to get rid of the moisture which has built up. Hope that helps.

Mark Surnoskie