First, don't drill it out any larger than you have to. If you do drill
it out, use a Forstner bit to get a clean hole. You might put some blue
tape over before drilling, just to be sure you get a clean edge. Then,
don't use a dowel for the plug. A dowel would give you end grain, which
will not match the face grain around it and would take a stain or
varnish differently. If you have a plug cutter, cut a plug from
something as close to teak as possible (e.g. teak, iroko, mahogany,
etc.). Otherwise, just buy some (e.g.
http://www.defender.com/product.jsp?path=-1|10918|296161&id=101599).
Glue it with CA glue or something like Titebond III. Use a flush cut
saw or good sharp chisel to trim it flush. I would use a card scraper ,
rather than sanding, to get it smooth. Finish.