Ive got my old gas block off and am preparing the new one, but it doesnt have holes drilled yet for the retaining pins.  I wanted to run this procedure past a few of the people who have done this before and see if Im on the right track.  If I use a bit smaller than the pins and pilot the holes, then use the proper bit once the block is on the barrel, would this allign it correctly to the barrel?  

no
what you wanna do is install it on the barrel
and lign up the gas port when the gas block is where it should be then drill the holes

How can I be sure the gas port is lined up?

Shine a flash light in the muzzle end of the barrel and look for the spot of light in the gas block.  If you don't see the light, you don't have the gas block aligned.

You can also take the little gas port cleaner end and stick it throught the gas port and it should go into the barrel throught he hole.

Just make sure that the gas block it straight up when you go to drill the cross pin holes.  If you are worried about the block moving while drilling, you can use a little bit of red locktite between the block and the barrel, although I don't that is really necessary.