I don't see any reason that it wouldn't work with any type of drill bit. If you test the drill bit prior to using the guide and the bit doesn't turn freely by hand it will certainly remove some of the metal. It appears Milescraft is using a soft metal to prevent excessive drill bit wear so I wouldn't expect this guide to last very long for heavy or everyday use. Remember what the purpose of a guide is for and since there is metal to metal contact keeping you straight...the result will be wear. My personal opinion is that the tool works as intended, (actually better) because the soft contact points kept it from moving around when I've used it, and for me it's an excellent value that I'll purchase again.
I would think as long as the bit fits in one of the available holes.
1 5/8 x 4 5/8 x 1 1/8 = L x W x H. So, yes, it should.
The hole sizes are 1/8", 3/16", 1/4", 5/16" 3/8" and 1/2" all sizes allow for drill clearance of several thousandth of an inch.