Lou -
I used to have a ShopFox 1704. You most certainly can drill pen blanks on that lathe but it's not necessarily easy.
Normally, the way that pen blanks are drilled on a lathe is to mount the blank in a scroll chuck on the headstock, and then mount a drill bit in a Jacobs chuck that is mounted in the tailstock. You then use the tailstock ram to advance the non-rotating bit into the blank with the lathe operating at its lowest speed.
To mount the blank in the scroll chuck, you need to either purchase special blank-drilling jaws, or else mount the blank between centers to turn it round, and then cut a tenon on one end for mounting in the chuck.
You can buy both a scroll chuck that will mount on the 3/4x16 headstock spindle and a Jacobs chuck on an MT1 arbor from several sources (I bought mine from PSI).
But there are some potential issues. The ShopFox 1704 has a 12" bed. Taken together, the scroll chuck and Jacobs chuck will consume about 6" of that length. However, in order to drill a blank, you need additional room to accommodate the blank and the drill bit. For most pens, the blank is only about 2" long, so that leaves about 4" of room for the bit.
If your drill bit is longer than 4", then there is a potential problem. That doesn't mean there is a showstopper - just another problem to be solved.
My experience is that with a short-bed lathe like the ShopFox, a better solution to to not use the scroll chuck to hold the blank for drilling. Instead, mount the Jacobs chuck in the headstock (be sure to use a drawbar to hold it in place) to spin the drill bit, and then feed a stationary (non-rotating) blank onto that bit. In this scenario, the lathe essentially becomes a horizontal drill press. I have found that using the tailstock livecenter to push the blank onto the bit does work and will drill a reasonably centered hole. But you will need to advance the tailstock ram very slowly - if you are drilling a species of wood that has a strong grain pattern, the bit will tend to follow the grain if you advance the blank onto the bit too quickly, and that means that you will drill a hole through the side of the blank. By slowing down the rate at which the blank advances onto the bit, you are better able to keep the bit centered on the axis of the blank. And of course when you are drilling pen blanks, the hole has to go all the way through the blank and you can't do that if you are pushing the blank with your livecenter. So you have to drill most of the way through the blank, back off the live center to get that point out of the way of the drill bit, and then push the blank the rest of the way onto the bit by hand. Hold the blank by it's side - don't try to push from the end or you could drill a hole through your finger!
