First decision; is the key meant as a location device or as a torque transmission device? If locating, the fit between shaft and sleeve will be tighter than if the intent is for the key to transmit the majority of the torque.
Second decision: is the process driven by the shaft going to require high peak (and/or reversing) torque loads? This includes what happens in the event of a fault elsewhere, not just the "normal" operation.
Calculate the required fit (interference, clearance, or transition), accounting for thermal growth of both sleeve and shaft, and for material properties (allowable stress, etc.).
Relatively simple sanity check when INTERFERENCE fit (i.e. sleeve smaller than shaft) is required:
1) Industrial processes with low peak torque (< 1.5x rated) and/or no reversing duty typically use 0.0005 inch interference per inch of shaft diameter.
2) Processes with moderate peak torque (1.5x to 2x) and/or limited reversing (think putting your car into reverse, which requires slowing down to limit the instantaneous torque on the gearing) typically use 0.00075 inch interference per inch of shaft diameter.
3) Processes with very high (> 2x) and/or frequent reversing (think dropping your car into reverse from 100 kmh) typically use 0.001 inch of interference per inch of shaft diameter.
For the specific shaft case mentioned (260.355 mm = 10.2502 in):
Option 1 gives a sleeve nominal inside diameter of 10.2451 in (260.225 mm)
Option 2 gives a sleeve nominal inside diameter of 10.2425 in (260.160 mm)
Option 3 gives a sleeve nominal inside diameter of 10.2399 in (260.095 mm)
From there, you'd need to determine the tolerance of the shaft diameter (+/- whatever) and adjust the sleeve diameter tolerance to maintain the appropriate fit force.
