I use a Kobalt break-off style knife, small size. About the same size as an Xacto but when the tip starts to get dull, I take a pair of plyers and snap the end peice off and it's like a new knife. There's about 12 "snap off lines" on each blade and it comes loaded with three blades. About 10$. Very comfortable grip too. I've been doing the cutting out proscess right on the disc, The vinyl cuts very easy and hardly makes a scratch on the disc itself. I find the transfer a real pain so I've just been tracing the original, apllying to the disc, then cutting.
Good luck