Many people want to create a smooth, sleek, look with flush set stones in their metal clay pieces. Some time ago, I got the following email from a student and thought I would share my answer with you.
"Hi! I've just finished a project that involved gypsy settings (these were small CZs set close together - almost touching - in a line, sort of simulated pave). The finishing, both in the greenware state and after firing, was a nightmare. It was almost impossible to get the clay really smooth (I wanted a mirror finish) next to the stones and in the very small spaces in between them".This is relatively easy. Start with fresh clay--not reconstituted. Make the base piece smooth and thick enough to accommodate your stones. Do not do anything about setting the stones yet. Get it as smooth as you can while wet. Dry thoroughly. Use successively fine grits of sanding pads or sand paper to get the clay surface as smooth as you possibly can. Now you are ready to set the stones.
For small round stones: Mark where each stone will be and use a small drill bit in your hand drill (pin vise or bead reamer) to drill a hole all the way through the clay. Then take a setting bur (for best results you should purchase jeweler's setting burs to match your stones) that is about 10% larger than your stone and use it in your hand drill to create a perfectly shaped hole for your stone. Test the stones in the holes--girdle edges should be a little below the surface of the clay. Remove the stones and make sure the piece is completely finished--smooth, no dust, and completely dry. Make sure the stones are clean. Set the stones in the clay and carefully place in your kiln for firing. If the stones are set on a curve, you can use white glue to hold them in place long enough to get them in the kiln.
After firing you should only need to brush and burnish. I find a tumbler to be the easiest way to burnish this kind of piece. If you are using metal polishing compounds and power tools (dremel/flex shaft), you need to be careful that you don't scratch the stones. This is why it is essential to get the clay as smooth as possible *before* setting the stones and firing.
For other stone shapes: The process is much like the one above, but you will have to use your file set after drilling the initial hole to create the properly shaped seats for the stones.