I'm sure there are some other creative options. For example, if you are looking for hidden options I would do this...
(I haven't tested this so it's at your own risk. I don't believe bondo will affect the operation but....)
Take a recessed contact like the one I linked to above. It uses a 1" hole for installation. Get a paddle bit just a bit bigger than the DC (Door contact), use it to create a recess for the contact to sit in 1/8 to 1/4 inch. Use this bigger bit to drill in the wood frame just a bit more than needed to let the face of the DC below the surface (1/8" or so, not too thin..I said that sort of...)
Then use a 1" paddle drill bit to drill the actual hole in the wood frame. Install the door contact. Make sure it fits tightly. Test it out with the magnet not installed in the door yet. Once confirmed it works, use some bondo to fill in the recess that is left. Sand the finish, primer and paint.
Now break away the plastic of the magnet part. I can be done and is a pain in the ass.
Drill a 3/8 hole in the door so that the magnet is aligned with your DC. Drill it just deep enough to leave an 1/8 or so below the wood surface. Bondo, sand, prime and paint.
Would that work for your concealment needs?