You are replacing the key cylinder not the ignition switch, the ignition switch is on the steering column, when the key cylinder is turned it pushes a metal bar that slides the ignition switch to the correct position.
Yes if the key will not turn you may need to drill the cylinder, but try EVERYTHING else first, because it is hard to drill, on purpose.
For normal removal and installation you turn the key to RUN then insert a long thin screwdriver or punch in the hole under the key switch, in the plastic cover, you will feel the button, push it in and cylinder will slide out.
new cylinder will just slide in and lock if in RUN position.
You can take the new cylinder to a locksmith first and have it rekeyed to your current door/ignition key, so you don't have separate keys for door and ignition.
In this thread the for an '86 Ranger, the actuator rod(the metal bar) was the problem:
http://www.therangerstation.com/forums/showthread.php?t=64081
Anyway, try spraying WD-40 or other lube into and around the key cylinder, tap key with screwdriver handle while trying to turn it, or anything else you can think of to get key to run position, this will make your life much easier.
If you do drill then mark the drill bits(you will need more than 1) with tape about 1 inch up so you know when to stop drilling, you can use your new cylinder length to be more exact.
Put some plastic on the floor(or rubber floor mat) and use lots of oil when drilling.
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