The rosette I purchased is about 1/32" thick. That means I needed to remove that much wood from my front panel in the shape of the rosette so it would sit flush with the panel. I rigged up something so I could use my router to do the work.
First, I added a piece of wood onto the bottom of the router base for reasons I'll explain below. I screwed it to the router base with countersunk screws and left an opening for the router bit to come through.
Next, I took what was left of the 3/16" rod I used for the truss rod and cut a piece about 3/8" long from it. On a piece of thin plywood I practiced what to do by first drilling a center hole big enough for the 3/16" rod piece. Then I calculated how far from the center of the 1/2" router bit I was using that I would need for making the first of two cuts for the circular groove. At that location, I drilled a hole in the router base attachment to accept the other end of the rod piece. So essentially I would have a common point of rotation between the router and the guitar panel.
Below is the plywood I practiced on a couple of times. You can see the center hole of each circle. That's where I had the small rod piece which also went up into the router base. I spun the router around with the bit set to cut 1/32" deep. Since my bit was only 1/2" and my rosette is 5/8" wide, I had to make two cuts by making a second hole in the router base in which to put the rod piece.
Here's the front panel with the rod piece installed:
And here it is after routing the groove:
Finally, with the rosette sitting on the panel but not yet glued in. I'll cut the sound hole opening later. The rosette comes with a slot on one side so that it has more flexibility. This will be covered by the fretboard later.