>>yes, a flush cut saw is the proper way of doing it... however i learn woodworking from my g'pa and so he's pretty much a master woodcrafter so he has taught me all these somewhat challanging ways of doing stuff... but it ends up either being easier, faster, or looks better.
Can't imagine that a chisel is easier, faster, or looks better than using a flush-cut saw, but then again I haven't tried it.
I'd use a flush-cut saw because I know myself: if I tried to do it with a chisel I'd eventually get bored or loose my concentration and end up doing something stupid (e.g. gouging the wood or snapping off a plug) that was difficult to repair. For me, the flush cut saw is pretty bullet-proof. The worst thing you might do is scratch the wood if you're really careless, and that can be taken care of with some sanding.
My other reason for recommending a flush-cut saw is this: it seems like there are many people who don't know how to sharpen tools properly. If you go out to Home Depot and buy a chisel, it's not sharp. Not even close, in my experience. If you take your newly purchased chisel out of the package and start trying to cut plugs, you'll probably get poor results.
Now I have sharp chisels, and you have sharp chisels, but does the guy asking this question have sharp chisels? If not, he may have more success with a flush-cut saw, which is ready to go right out of the box...