It looks like with iPhone 1.1.2 and iTunes 7.5, Apple has reenabled the old trick of renaming a .m4a file to a .m4r and adding it to your ringtones. It syncs over, and when you tap settings -> sounds ->ringtone there are seperate sections for custom ringtones and built-in ringtones.

My appologies if this has been reported elsewhere, I'm still getting the hang out how this site is organized.