I decided to attempt this for my bench hook after watching Roy Underhill make a stopped sliding-dovetail on an old episode of the Woodwright Shop. On the show, he mentioned that the same basic principles also applied to stopped dadoes. You start like you would with any other dado, by marking out all of your lines. The difference here is that you chisel a small mortise where your dado stops. This gives your saw a place to go when you are sawing down your walls.
Here is a picture for illustration. My dado is 3/4″ wide and 1/4″ deep. It stops about 3/4″ from the edge of the board. My widest mortise chisel is only about 3/8″, so I had to make several passes to width. I made the mortise slightly deeper than 1/4″, so that I could ensure that my saw made it to the proper depth. In the end it won’t really matter, as this won’t be seen.
Once you’ve made your mortise, it’s simply a matter of sawing to your line, chiseling out the waste, and then progressing to final depth with router plane. If you don’t a router plane, a chisel could used for the entire process.