The decoration is test-fitted before gluing. It consists of a sandwich of black/white wood binding, the herringbone and another layer of black/white. Hot animal glue is used for gluing as it is water based and the sandwich will expand in the channel to fill any gaps.
Finally, the binding is scraped flush with the cabinet scraper and the soundhole is cut out with the circle cutter. Don’t worry about the gap at the top - that will be covered by the fingerboard.
Making An Acoustic Guitar - Page 8
Part 6 continued - Soundhole Decoration