At this point it’s really a tough question. There are a few software hacks out that will allow you to create a ringtone using any mp3. The problem is that Apple doesn’t seem to like this and has released a second update to iTunes (second one within 10 days) who’s primary purpose is to block custom free ringtones from working with the iPhone. The question with the free ringtones will always be… “will they work with the next iTunes or iPhone update?”
At this point your best bet is to play nice and create ringtones the legit way by paying $1.98 on iTunes. We can only hope that hackers will wear down Apple and eventually allow us to use our own music as a ringtone (go figure)