thats not a good idea, cf under water makes the cf fray more easily in my experience

I haven't had too much experience with CF, but I have done a bit of work with Garolite G-10 (same "family" as CF). This stuff is quite tough on tools. On my scroll saw I would go through normal blades (that I use to cut aluminum with) after about 3 inches, at which point they were completely dull. I have also noticed that my countersinking bits aren't as sharp as they were before they hit the G-10.

G10 is wonderful. It's basically the fibreglass equivalent of CF sheet. Similar density, less rigid, but less brittle than CF. Same material used for PCBs, so very good electrical insulator. Can be had in black too!

Yeah, and it's cheaper than CF. I got the greenish colored stuff.

The G10 is tough stuff. I have a couple of pocket knives with G10 scales and use them to open beer bottles all of the time, with no appreciable damage.

Like others have said, the Dremel with some tape over the cut works well.

For those of you that want repeatable cuts (or just can't do a straight line with a Dremel like me) fiberglass router bits are the hot ticket.