Thank you for choosing JustAnswer and allowing me to help you resolve your Toyota questions!
The ignition switch needs to be turned to the ACC position. There is a hole in the aluminum housing on the opposite side of the housing as the ACC position. While in the ACC position use a 1\8 inch punch or small screw driver and push the release pin up into the cylinder and pull the lock cylinder out of the housing. If the lock cylinder won't move to the ACC position there are a couple of tricks short of drilling the lock cylinder out.
What I have done in the past when this is the case is to drive a screw driver (one with a square shank) into the lock cylinder. Use a wrench to force the lock cylinder to the ACC position. Don't drive it so hard that you break the aluminum housing off but it will take a good couple of whacks.It will take some force to turn the cylinder to the ACC position. This has worked for me in a number of occasions. The other option is to drive the pin up into the lock cylinder or try to drill it with out damaging the aluminum housing. Either way the cylinder can be removed. The last option is to drill into the lock cylinder its self and remove piece by piece I don't normally like this option.
There is no secret. If the 1/8 inch pin is pushed all the way in to the lock cylinder you should be able to grab the outer casing of the lock cylinder assembly and pull it out of the aluminum housing. If you have an air hammer with a very small pin punch bit it works great to drive the pin into the lock cylinder with out damaging the housing. Did you get the pin pushed all the way in to clear the aluminum housing? If not sometimes you can use a punch and drive the pin into the lock cylinder to get it to clear and release the cylinder.
Because you have already drilled into the cylinder you are going to have to drive the release pin into the cylinder very carefully. I use an air hammer with a very small bit because it has less overall force and more direct hammering pressure.
Depending on how much you damaged the lock cylinder you may not be able to get the lock cylinder to turn at all. At this point your only solution is to drive the pin into the lock cylinder itself. If you doing this with a small punch and hammer be careful that you do not damage the aluminum collar. I normally use an air hammer that puts precise quick hammering blows on this pin and it will drive the pin into the old lock cylinder. You need to be careful that you do not damage the collar. The steel pin is extremely difficult to drill because it is harder than the aluminum housing and has a tendency to spin as you trying to drill it.
I tried hammering the pin and was getting nowhere so I put the punch on the end of a small screw jack and pushed it until the pin button was smashed up in the hole. It did not push a hole clear through the cylinder - does it need to? If I push the jack any further, it is going to crack my dashboard or the whole ignition assembly, which is in the dash board.
Will the pin actually push through and leave a hole in the cylinder??
I do not have an air hammer and I'm not sure how I could position one under the dashboard and still have access to the cylinder pin.
The pin only needs to be driven into the cylinder about 3/16 of an inch just enough to clear the housing to release the cylinder. Using steady pressure is not going to work it. You need hammer pressure. The pin will push into the aluminum of the housing.