For the best texture, chop nuts by hand with a large, sharp knife. A food processor can crush and extract too much oil from nuts, quickly reducing them to a paste. However, if you are in a hurry or have a lot of nuts to chop, the food processor is the easiest way to do it. Pay attention and do not overwork them. Pulse the machine instead of running it continuously in order to control the texture better.
If you plan to use chopped nuts in a baking recipe, add a little of the flour or sugar from the list of dry ingredients to absorb excess oil as you process the nuts. This will help keep the nuts dry and help them spread evenly throughout the batter or dough.
When nuts are ground, they release their natural oils. You must be vigilant when grinding nuts, for they can easily end up as nut butter. A rotary nut mill, a simple contraption with a hamper for holding the nuts and a manually turned arm, assures the baker of perfectly dry ground nuts every time. For less precise grinds, a food processor can be used.
For best results, combine the nuts with a little of the flour or sugar called for in the recipe you are preparing and process for no more than 5 to 10 seconds at a time. Be sure to watch the nuts carefully to prevent overprocessing.
Adapted from Williams-Sonoma Kitchen Companion: The A to Z Guide to Everyday Cooking, Equipment and Ingredients (Time-Life Books, 2000)