It appears that the 1.1.1 update either deletes the "main ringtone" (the one that plays when you get an incoming call) or will delete it when you go to look at it in Settings.
However, it appears that ringtones assigned to contacts remain intact, at least until you edit them.
A forum member running iTunes 7.4.0 may have found a workaround. It involves first sending ringtones with a .m4r file extension to your iPhone via iTunes, though they will not play. You then upload the ringtones a second time, now with a .m4a file extension, using a program like iToner (they used MakeiPhoneRingtones). Apparently, having both file extensions on the iPhone and the Mac seems to make it work.
Mind you, I have not tried it myself (though I am considering it) so no guarantees. 🙂