There is usually ample tooth space on commercially made timing pulleys, that I don't think that that is critical. Smooth corners with nice little radii would be good, of course, to prevent chewing the belts up.
The really critical dimension of a timing pulley is its OD. Actually, its OD is most commonly referenced as the pitch diameter, because that is where the belt's true pitch circle is created. The belts are manufactured with very exact and accurate tooth spacing. If this pitch diameter of the pulley is not exactly correct, then the belt is going to tend to 'crowd the teeth' on the pulley, and cause wear. There is a fair amount of frictional grip of the belt on the OD of the pulley, and the belt does not readily fall back into the gaps created for the belt teeth. So, "hack out" the tooth space however, but make sure the OD of the pulley is an exact multiple of the belt pitch.
eg.: 3/8 belt pitch, 10 tooth, OD of pulley is (10 * .375) / 3.1415927
I've machined a few timing pulleys both with form cutters and with slitting saws. I typically would gang a pair of slitting saws far enough apart to straddle two teeth on the blank, as this creates a bit of a natural angle on each side of the tooth face. That leaves the work of filing or sanding a bit of a fillet radius on the top corner of the tooth before the pulley is put into service.
First you get good, then you get fast. Then grouchiness sets in.
(Note: The opinions expressed in this post are my own and are not necessarily those of CNCzone and its management)