Free Custom Ringtones in iTunes 7.4.2 [Doesn't Work]
The workaround is simple, and simply involves combining the previous methods (file renaming, and ID3 tag changes).
You have to use that ID3 mod (Atomic Parsley), but use .m4r extensions. Once you change the STIK field to 14 using atomic parsley and change the extension from .m4a to .m4r, you can drag ringtones into your library again by hand
The ID3 mod was previously described which properly tags the AAC files as Ringtones. The M4R filetype also tells iTunes to place the ringtones into the proper location.
Due to the simplicity of the changes, it seems maybe Apple didn't maliciously break Ringtone support but simply solidified the format.
Sorry: This doesn't appear to work.