What you need to do is...
1. go to the song you want
2. cut a section of the song you want as a ringtone (you can do this in itunes)
3. drag the new section of the song onto your desktop
4. rename the song on your desktop from m4a to m4r
5. reimport it into itunes
6. it will be listed under ringtons now
If it is in mp3, convert it to m4a.