I'm not sure of the hole size for the U BOLTS, I think we used 1/4 or maybe 7/16", but since there's a plate going across on the threaded end, it didn't seem to be a problem as far as weakening the plywood.
 One thing I didn't mention, the bolts will stick up higher than the nuts, so you want to cut them flush, and hit with file/emery paper, so you don't have a sharp edge to tear the tarp. I also used the self locking nuts with the nylon liner. They're less likely to vibrate loose.
We used a 5/8" exterior plywood. Didn't have a chance that time, but my friend who used the rack for hauling luggage on other trips, put 2 coats of Marine varnish on both sides of plywood when we got back.
 All in all it made a nice rack, fairly cheap, easy to do, and not too bad looking either.