To make a round hole square cheap... needle file. Takes a bit of work, but when I first got my lathe I made a 3/8" boring bar by drilling 2 1/8" holes (one at 90, one at 45 to hold cutters at different angles) and then squared up the corners with a square needle file. Seems like it would take forever, but in reality I think it only took me an hour or two for both. You may be able to get a larger file in there since I'm guessing your using a larger bit.
The other option is to just drill a round hole big enough for the shank of your cutter. I made a between centers boring bar that used this method, and it was just fine. Just make sure the set screw is pushing "down" on the shank (same direction as the cutting forces).