Exactly what I was thinking... or just do a revolve cut. Establishing the axis could be tricky, though.

You could also try a filled surface. Make a sketch tangent to the face of the cylinder and draw the of the elipse. Next, on a perpendicular plane, add a sketch point to guide how deep the cut should go into the part; then do a surface cut. Check out the SUFRACES tutorial on the SW help menu for more info.

Or mabye an INDENT feature could work?