Aha! I am the bone expert!
What you need is a dremel. The bone can be purchased at PetSmart... it is called sterilized bone. The bone comes pre-cleaned and pre-decreased (though not very well...). You will need some kind of mask if you use a band saw to rough cut the pieces.
>>Dremel with cutting disk, drum sander, buffing wheels (one for each kind of compound), and a cone shaped grinder bit (they are yellow to pink in color. looks like sand glued to steel rod)
>>Sand Paper. Maybe 400 grit to 6000 (not all the in between, just a variety)
>>Coping saw. Get a variety of blades. All I have seen work pretty much the same.
>>Buffing Compound. I do not know where you live, but if you have a Menards nearby then they have all the tools and compounds you will need (except the coping saw. I am not sure if they stock).
Watch this video:
If I remember anything else I will post...