Realize that issuing a SOURCE command is the same as running an import of the dumped SQL from shell. Either way, it is going to take a long time. Outside of that, you have the steps correct - flush table with read lock on master, make a database dump of master, make sure you note master binlog coordinates, import dump on slave, set binlog coordinates, start replication. Do not work with the raw binaries unless you REALLY know what you are doing (especially for INNODB tables).
If you have a number of large tables (i.e. not just one big one), you could consider parallelizing your dumps/imports by table (or groups of tables) to speed things along. There are actually tools out there to help you do this.
You CAN work with the raw binaries, but it is not for the faint of heart. In the past, I have used rsync to differentially update the raw binaries between master and slave (you still must use flush table with read lock and gather master binlog coordinates before doing this). For MyISAM tables this works pretty well actually. For InnoDB, it can be more tricky. I prefer to use the option to set InnoDB to write index and data files per table. You would need to rsync the ibdata* files. You would delete ib_logfile* files from slave.
This whole thing is a bit of a high wire act, so I would not resort to doing this unless you have no other viable options. Absolutely take a traditional SQL dump before even thinking about attempting a binary file sync, and each time until you are VERY comfortable that you actually know what you are doing.