Sorry Tuner, I disagree with you. Start with octagon blank and turn round where wanted. The round might be a little smaller than in the picture, but much easier to do.
CraigC, buy some good tool steel blanks such as Rex aaa and grind away. Just be sure to leave some rake and relief so it doesn't dig in. Needless to say, play on some scrap round stock before tackling the barrel. If you don't have any luck grinding the radius tool, cut grooves with a parting tool and round over with a small file as rc said.