The solution covered here requries soldering skills, knowledge of Lithium batteries, how to connect batteries for balanced charging, how to connect batteries in series and of course basic electrical knowledge. You might also need an assortment of small wires, connectors, shrink tubes, small tools (and small fingers!) and fabrication skills. I will not cover these details in this article.
You also need charger that can handle Lithium batteries (and also the correct type). You can't use the original drill charger.
The particular drill used 10 NiCd (nickel-cadmium) batteries in series for 12 V total output. It is a modest 1200 mAh battery pack and has to be charged quite often.
There are a couple of different modern batteries that can be used. Li-Ion (lithium-ion) is the most common. This kind of battery is used in many RC applications, power tools, electric cars, smart phones etc. A better variant of lithium for really high output current is Li-Po (lithium polymer). The drawback with this one is that it must be handled carefully to avoid explosions! I.e. no overcharging or abusing. A more stable lithium variant is LiFePo4 (lithium iron phosphate). These batteries are very safe, have high output current and the output voltage is almost static during discharge. The power density is also very high. LiFePo4 batteries are quite new on the market, but you can find them for instance in good RC shops.
I decided to use two LiFePo4 packs in series, 2 x 6,6 V = 13,2 V. The battery packs were rated 1700 mAh. They are marked 2S1P, 2 cell, 6,6 V, 20C with a 2S balance connector. 20C means that the battteries can be discharged with a maximum of 34 A! (1,7 Ah x 20). That's an incredible current for such a small battery. From some more or less unreliable sources I've estimated that a drill such as this needs at most 5 - 15 A during heavy drilling. The batteries will be more than adequate.
To connect the batteries in series, I used an adapter.
This adapter was further modified and the output was connected in parallel to the old connector of the battery pack. The idea was to easily connect the batteries in series and have a charging connector.
Additionally you need an adapter for the balance connectors (because of the series connected batteries). In this case, I needed a 2S to 4S adapter.
Lithium batteries must be protected from being discharged too much. If the voltage becomes too low, the battery will be damaged. This is also the case for LiFePo4 cells.
The old drill didn't have any such protection. But there are cheap Lithium protection circuits available on the Internet. This one is compatible with 1 - 8 battery cells, shows total voltage and individual cell voltage and has a buzzer for low voltage. The low voltage can be set from 2,7 to 3,8 V. I set it to 2,8 V for the LiFePo4 cells.
And from the bottom side. You can see the LED display that shows the battery voltage.
The protection circuit can be directly connected to the balance connector of a Lithium battery back.
Schematic that shows the Low Voltage Alarm connected to the 2S to 4S balance adapter. A switch breaks the negative voltage to the alarm and is sufficient to turn the alarm off when the drill is not used. Because the balance connector is needed for charging, I cut a small hole in the middle of each wire and soldered the wires to the alarm. By disconnecting the wires from the connector (carefully use a small screwdriver to press down the tabs), you can put heat shrink tubing on the wire to protect it.
Putting it together
The picture shows the assembled pack. The protection circuit is not connected yet, but I was able to do a test run. If you look carefully you will see that there is a 6S balance connector. That's because I didn't have a 4S connector yet, so I swapped the positions of the wires in the 6S one and left a few disconnected. Plugging it into the 6S connector on the charger works just fine.
In this picture the protection circuit is soldered to the balance cable and everything is in place.