look up your local Apple store (Google maps "apple" search your local area) and get their number and call them, I ended up doing that and they helped me solve my problem.
With your phone connected to your computer, log on to the iTunes store. Then sync at least one additional song to your iPhone. Yor account info will transfer with the song. Delete the song on the next sync if you don't want it on your phone.
I was under the impression that the question was how to log in to an ITunes account by using the IPhone (without connecting it to the computer), but maybe I'm wrong.
Either way, is it possible to buy ringtones, etc. without using an internet connection at home? My whole reason of getting the IPhone was to get rid of my dialup connection at home (I'm not at a location that offers high-speed). So, I'm going to be pretty bummed if I can't stuff for my IPhone, simply by using my IPhone (ie: ringtones, updates, etc.)
My understanding is that you can buy content (albums, songs, etc) directly from the iphone, but not make ringtones, since that requires use of the ringtone editor only located on the desktop itunes. So I think that the short answer is that it isn't going to do everything that you want it to do. Also software updates for the phone are only available from the desktop version of itunes. These files are large and using edge to transfer them would take an inordinate amount of time.
I was having this same problem, but found a fix for it. I deleted my iPhone backup from iTunes and then restored my phone. iTunes WiFi Store works great now.