I have been doing a lot of turquoise inlay lately, and always get questions on how to do it. Here are some of the (several) techniques used in the bowl shown below:

What kind of turquoise? This was done using real turquoise, broken nuggets in this case.

How do you prepare it? I first crush the turquoise using a piece of 5/8" steel rod and a stainless steel jigger to hold the pieces. (I tried using a granite/marble mortar and pestle, but soon had a lot of white powder in the crushed turquoise - not a good idea.)

How big should the pieces be? The size of the crushed turquoise will determine the look of the finished inlay: fine powder will have a smooth, even look and is very easy to finish; larger pieces will look more like mosaic and will take a lot more finishing. I like to use pieces about the size of an "o" as the primary pieces, and fill in around them with smaller pieces or fine powder (no matter what size you make, you will get a quantity of powder).

Examples:

Small pieces:			Medium:
Large Pieces:			Quartz Matrix
Black Matrix:			In Cracks

How far do I finish before inlaying? Finish both the outside and inside of the bowl and sand to 80 grit. Then apply a generous coat of sanding sealer (I use 1 lb. cut shellac) to protect the wood from glue "drips" and "runs".

What is the actual process?

Depth. There is no need to fill the entire hole with turquoise. Using sawdust, you can fill the hole to about 3/16" from the top. Tamp it down and set it with a few drops of thin CA glue.
WARNING! Do not breathe the fumes from the CA glue. It's a good idea to make sure there is a slight breeze from your back AWAY from the glue site. Obviously, it has to be a gentle breeze if you don't want to blow away the raw turquoise.

Filling with Turquoise. Put a little fine powder in the bottom of the hole as a bed (and to use this stuff up if you are going for the look of the larger pieces) and then fill in with the larger pieces. Use a flat tool to tamp the turquoise down a little and get it even with the top of the hole (anything sticking up above the rim of the hole will have to be sanded off, so leave as little as possible). As you progress, use a drop or two of CA glue to set the turqouise in place.

Finishing. Once you have the hole filled with turquoise, add thin CA glue a drop at a time until you get an even film of glue even with the rim or just a little higher. Set with accelerator. Now you need to smooth the surface of the glue and turquoise even with the rest of the bowl. This can be done with a scraper or sandpaper:

  - Scraper. This is the best way to get the top smooth and remove the glue from the surrounding area. Use a small scraper (the small end of the Sandvik curved scraper works for me) and gently take off the top surface of both the glue and the turquoise. A well sharpened scraper will cut the turquoise. Remove ALL of the glue from the surrounding area so that the glue/turquoise mixture is even with the sides of the cavity.
  - Sandpaper. This is a faster method than the scraper - especially if you use a power sanding tool - but it also the easiest way to gouge the wood. Take it easy and slow.

Once you have the inlay smoothed and even with the rest of the bowl, apply some sanding sealer to the sanded/scraped area so that it looks like the surrounding wood.
Now finish the bowl the way you regularly would.

Variations. As noted above, fine powder tends to give a uniform look, while larger pieces of turquoise present more of a mosaic pattern. You can mix either with a litle ebony sawdust to make it look like the turquoise is set in matrix. A fine mixture of turquoise powder and ebony dust makes an excellent filler for cracks, knots and smaller holes.