Choose another preset shape or ding of choice and draw out your shape (use a contrasting colour), making it smaller than your button. Objects – Align center in canvas, or use the move tool to position it. Convert to raster. Click on an empty area with your magic wand (tolerance set to 0), then Selections – Invert. Go to your button layer and hit delete. Select none. You can now either delete or close your shape layer.
Add a bevel, either using PSP’s bevel effect or the Eye Candy Bevel filter.
Click inside the cut-out with you magic wand, then Selections – Modify – Expand by 3 pixels, add a new raster layer, drag it under the button layer and fill with a complementary colour or pattern. Select none. On the button layer, click inside the cut-out again, expand by 1 pixel, add a new raster layer, then Effects – 3D effects – Cutout. I used Vertical: 4, Horizontal: 4, Opacity: 84, Blur: 20 and a dark comnplementary shadow colour, but you’ll need to adjust your settings depending on your shape and colour. Seelct none. Layers merge visible.
Draw the holes on a separate layer. Selections -Select all – Float – Defloat, hit delete, then go to your button layer and hit delete again. Keep selected, add a new layer, and add a slight cut-out. Select none, merge visible, and you’re done. You can now add stitches to the button or decorate it using another ding.