I'm rubbish at IT so here's my version which worked after taking bits from other versions using windows 7:
1. Select track in iTunes library
2. Right click and select get info
3. Select options tab
4. Change stop time to 30 seconds
5. Ok
6. Right click song again and select 'Create AAC Version'. You will hear the iTunes tone.
7. Right click AAC Version (directly below original track)
8. Select summary to see where new format is saved (under the heading WHERE:- shows as m4a format
9. Find location as shown in summary (usually C:\Documents and settings\User\My Documents\My Music\iTunes\iTunes media\Music\name of song etc.
10. There should be 2 versions of the song in different formats. Change the m4a version to m4r by renaming it.
11. Copy the m4r version to the 'Tones' folder of iTunes Media (still in the c drive)
12. Go back to iTunes (may need to close and reopen it) and connect phone.
13. Go to Tones and sync track with phone
14. Check settings/sounds on phone and new ringtone will be there ( I didn't have to delete the original mp3 and its still there in my library). The ringtone works great.