The small rotary cutter works great. Just press it down into your fringe. Don't move it back and forth. It makes the perfect sized hole. Furthermore, how often do we use those tiny rotary cutters anymore? It's a good use for them!!
The other thing I have done with tie blankets to shake up the process a bit is to sew the side seams, right sides together, turn right side out and then fringe the ends. I personally am a little tired of just fringing the whole darn blanket as I have seen this for so many years. Doing it this way makes for a little bit bigger blanket too as you are not using up so much fabric in the tying process.