Vi skulle precis borra ett hål för kroken när barnen somnade.

Not exactly. In this sentence, skulle is not mainly a conditional would. It often expresses a kind of future seen from the past, or something that was about to happen / was going to happen.

So:

• Vi skulle borra ett hål = We were going to drill a hole
• with precis, it becomes more like We were just about to drill a hole

This is a very common Swedish use of skulle:

• Jag skulle gå hem när det började regna. = I was about to go home when it started raining.
• Hon skulle just ringa dig. = She was just about to call you.

So here, skulle helps show that the action had not quite happened yet when something else interrupted it.

Here, precis means just, in the sense of just then or just about to.

So:

• Vi skulle precis borra... = We were just about to drill...

In other contexts, precis can also mean:

• exactly
• precisely

For example:

• Precis! = Exactly!
• Det är precis vad jag menar. = That is exactly what I mean.

In your sentence, though, it is about timing, not exactness.

In Swedish, adverbs like precis often come after the finite verb and before the infinitive.

Here:

• skulle = finite verb
• precis = adverb
• borra = infinitive

So the pattern is:

• subject + finite verb + adverb + infinitive

That gives:

• Vi skulle precis borra...

This is very natural Swedish word order.

Compare:

• Jag ska snart gå. = I will go soon.
• Hon ville inte äta. = She did not want to eat.
• Vi skulle precis börja. = We were just about to start.

Borra means to drill, and ett hål means a hole.

So borra ett hål is the normal way to say drill a hole.

A few useful points:

• hål is a neuter noun, so it takes ett
• singular indefinite: ett hål
• singular definite: hålet
• plural indefinite: hål
• plural definite: hålen

So:

• ett hål = a hole
• hålet = the hole

Because hål is an ett-word in Swedish.

Swedish nouns are divided into two grammatical genders:

• en-words
• ett-words

Since hål belongs to the ett group, you must say:

• ett hål

not:

• en hål

This is something learners simply have to memorize with each noun.

In this sentence, för kroken means something like for the hook or intended for the hook.

So:

• ett hål för kroken = a hole for the hook

This sounds natural when you mean the hole is meant to be used with that hook.

Why not till?

• till often means to, for, or for the purpose of giving/connecting to something
• but för is very common when something is intended for or meant for a purpose/object

So för kroken is the natural choice here.

Because kroken is the definite form: the hook.

Swedish often puts definiteness at the end of the noun:

• en krok = a hook
• kroken = the hook

So:

• ett hål för kroken = a hole for the hook

This suggests the speaker has a specific hook in mind, not just any hook.

Because Swedish usually marks the by adding an ending to the noun instead of using a separate word like English does.

Here:

• barn = child / children depending on context
• barnen = the children

So the -en ending here marks definiteness.

Useful forms:

• ett barn = a child
• barnet = the child
• barn = children
• barnen = the children

So barnen somnade means the children fell asleep.

Because somnade means fell asleep, while sov means slept / was sleeping.

This is an important difference:

• somna = to fall asleep
• sova = to sleep

So:

• barnen somnade = the children fell asleep
• barnen sov = the children were sleeping / slept

In your sentence, the point is that the children changed state at that moment, so somnade is the right verb.

Somnade is the past tense of somna.

The infinitive is:

• somna = to fall asleep

The past tense is:

• somnade = fell asleep

This past event works well with the earlier idea of an action that was about to happen:

• Vi skulle precis borra... när barnen somnade.

That means one event was imminent, and then another event happened.

Because när introduces a subordinate clause, and subordinate clauses normally do not use the main-clause inversion that English speakers sometimes expect.

So after när, the normal order is:

• när + subject + verb

That gives:

• när barnen somnade

not:

• när somnade barnen

Compare:

• Jag gick hem när det började regna. = I went home when it started raining.
• Hon log när barnen kom in. = She smiled when the children came in.

So the clause after när keeps the normal subordinate-clause structure.

It strongly suggests that the drilling had not happened yet at that moment.

The sentence presents the action as something that was just about to happen, but then another event occurred:

• när barnen somnade

So the most natural reading is:

• they were about to drill the hole
• then the children fell asleep
• the drilling had not started yet, or at least had not properly happened yet

This is exactly the kind of nuance Swedish often expresses with skulle + an infinitive, especially with precis or just-type timing words.

In some contexts, skulle can mean were supposed to, yes. But in this sentence, that is probably not the best interpretation.

Because of precis and the time clause när barnen somnade, the sentence sounds much more like:

• We were just about to drill a hole for the hook when the children fell asleep

So here the idea is imminent action, not obligation.

Compare:

• Vi skulle borra ett hål i väggen. = could mean We were going to / were supposed to drill a hole in the wall
• Vi skulle precis borra ett hål... = much more clearly We were just about to drill a hole...

No. Vi just means we.

It is capitalized here only because it is the first word of the sentence.

Normally:

• vi = we

At the beginning of a sentence:

• Vi

Very close to English, actually.

Word by word, it is roughly:

• Vi = we
• skulle = were going to / were about to
• precis = just
• borra = drill
• ett hål = a hole
• för kroken = for the hook
• när = when
• barnen = the children
• somnade = fell asleep

So the overall structure is very natural and quite parallel to English:

• We were just about to drill a hole for the hook when the children fell asleep.

What mainly differs from English is:

• the use of skulle
• definiteness built into nouns like kroken and barnen
• the exact verb choice somnade = fell asleep