Specifically, he asked about "Permatex" - some race organizations accept a dab of silicone (the red high-temp exhaust gasket maker is best) as a substitute for proper safety wiring. It's definitely expedient, but it's messy, hard to remove completely, and is a dust/dirt/oil magnet that makes your bike look sloppy. Personally, I strongly believe that nothing looks as clean and professional as a tidy safety wiring job.
General:
If you want to know about safety wire, ask people in the military or aviation industries, they are the pros... paging WingFixer. Step to the Mic and correct any mis-information I may perpetrate.
First and foremost, safety wire should be considered visual confirmation that a fastener has been properly tightened. Safety wire is not supposed to be anything other than a safety net against a properly installed fastener backing out from vibration - it's not magic: if you don't install your fastener right, safety wire is not going to, for example, prevent brake fluid from leaking because the banjo bolt wasn't tight. So, use your torque wrench, double check that all the fasteners on an assembly are tight before wiring it up.
Tools:
A power drill - it can be any kind of drill - corded, cordless, or even a drill press. It just needs to be able to turn slowly.
A fistful of 1/16" drill bits - small drill bits are retardedly fragile, they will break, buy spares. Like Little Tavern says, "Buy'm by the bag!" I always cheat on larger fasteners and use the next size up, 3/32" which are significantly stronger. Cheap drills are the work of Satan, and will frustrate you to no end - buy quality bits!
Cutting oil - don't use WD40, go to the plumbing department of a hardware store and buy a small squeeze bottle of "dark sulfured cutting oil". I'm not kidding when I say that it will double the life of your drill bits. Smells like ass, tho.
A center punch - you can go low-tech and use a prick-punch and a hammer, or go high-tech and get an automatic center punch.
As an interesting aside, the automatic center punch is excellent for shattering automotive safety glass if you're, for example, trapped inside under water. Or not. I'd never suggest that a number of DC motorcycle couriers used to carry these to deter car drivers from violating their right of way.
And obviously, safety wire pliers. I've seen prices on these vary from $9 at Harbor Freight to $70 at Snap-On. They come in two sizes, I picked the big size since I have big hands - I can't imagine there is much of a functional difference between the two sizes. I've never regretted buying a mid-priced version with a return spring in the twisting mechanism - that's the only feature I'd describe as a a deciding factor.
Setup:
Start by properly torquing the fasteners in the assembly, then mark the faces where you want holes - you can use a Sharpie or if you have access, your center punch. Remove the fasteners and hold them in a vise. In general, it's not wise to try drilling fasteners in place, or with the fastener flopping around loose on a workbench. Drilling fasteners freehand is a recipe for broken drills. When using a vise, use something to protect the threads - I made a sweet set of copper jaw covers from some leftover flashing. A bit of old leather from a shoe or belt works great, too. If you don't have a vise, you could use locking pliers and a C-clamp to hold the pliers to your work bench.
Hole placement:
By far the easiest way to get a hole through a fastener is to buy it that way. Unfortunately that can get expensive, so most people drill their own fasteners.
Standard hex bolts are the most common. You can drill them in a variety of ways - across the flats, diagonally under a hex point, or diagonally down from the top and out the side of a flat. Nuts are pretty much limited to diagonally under a hex point.
Some bolts come with a dished depression in the center of the head - these are great for wiring, just come through the flat into the depression.
Allen bolts (internal-wrenching with a hex key) are metalurgically-speaking, harder than a hooker's heart, so unless they're stainless, don't bother trying to drill them. You'd do well to buy pre-drilled replacements.
People don't normally wire screwdriver-slotted fasteners.
Sometimes people drill holes through the threaded portion of a bolt, I don't recommend this because it does not maintain torque on a fastener -- it may keep you from loosing a part, but it won't keep an assembly functioning correctly.
Drilling:
Always start by center-punching exactly where you want the hole. If the punch isn't where you want it, you can sort of migrate the punch-mark by tilting the punch toward where you want the punch-mark to be, and tapping the punch a few times - you'll get a deeper punch-mark, but it will work fine. I keep a squirt bottle of cutting oil on my bench near my vise so I can keep the drill bit wet with oil. It's actually quite convenient if you can put a small jar of cutting oil where you can just dip the drill bit.
I prefer to run the drill just as slow as it will go, with firm pressure - you don't want to flex the drill, but you need the drill to cut the material. If your drill start squeaking or chattering, renew the cutting oil. You should see at least one, ideally two helix of metal coming out of the hole as you are drilling -- this means your drill is nice and sharp.
If you are just getting tiny little metal dust out of the hole, your drill is dull. A dull drill is far more likely to break than a sharp drill since you naturally push harder. You ought to throw it out now before you ruin something. I managed to poke a broken drill bit through the side of a finger doing this.
You really, really want to have steady hands - tilting the drill off-axis flexes the drill and will cause it to break very quickly. Arrange a brace for your elbow if necessary - a heavy tool box next to the vise, a stack of books, whatever.
One benefit of running the drill slow is that you can hear the drill starting to come through the bottom of the hole. This is the moment when most sharp drills break - the cutting edge grabs in the thin metal and snaps off the drill. When you hear it reach bottom, pull the drill out, renew the cutting oil, and bring the drill up to maximum RPM, then with very very light pressure, allow the drill to finish the hole.
To start a hole that runs diagonally across a hex point, I usually put the center punch mark about 1/3 of the width of the flat away from the hex point. The goal here is to leave enough 'meat' at the hex point so the safety wire doesn't pull through, but not so far away from the point that on a nut, the hole interferes with the thread. Start the drill perpendicular to the flat, and allow it to go a little less than one drill-diameter into the bolt, then bring the drill up to max RPM and slowly tilt the drill so it points across the hex point and resume normal, slow drilling.
Ken also asked about a drill guide for safety wiring -- they are intended to make drilling across a hex point easier. I have never used one, so I don't have a strong opinion about it, but I figure that the method I describe above may take a little practice, but works fine. There are several types of jigs:
Wiring:
Safety wire is made out of stainless steel, and comes in several sizes from .015" to .062". I prefer the thinner stuff. It's easier to work with and makes a smaller hole in your thumb when you poke the loose end.
Before you start twisting a bunch of wire around your fasteners, plan how you want to use the wire and twists. The safety wire must be routed so that it prevents counter-clockwise turning of the fastener which is being wired. The twists must come off of the fastener head so that it will be in tension if loosening occurs. You can't push safety wire, it doesn't work that way.
Regarding the twists, there is an actual standard for number of twists per inch by thickness of the wire, I shoot for about 12~15 turns, it should NOT look like rope when you're done, that's way too tight! Don't over-twist, it will break. If it breaks, you have to start over. Where to grip the wire pair with the safety wire tool is a challenge, because the wires shorten as they twist! I figure I can twist more wire easier than I can untwist it, so I usually take a slightly short grip, then see how it goes. Always always always finish your wiring job by 'closing' the tail end so the sharp bits point inward -- if you're racing, your tech inspector will thank you.
Also, do a google search on safety wiring -- there are numerous safety wiring tutorials.
IMHO, patience with the drilling is the single biggest obstacle that people need to overcome before they become proficient at wiring.
Enjoy!
I need to wire up my SV soon so I'll be coming back to this 
