Yes you can apparantly. You have an option iTunes to turn purchased songs into ringtones. Unfortunately for me I keep getting an error.... Just another disappointment with the iPhone to add to the long and ever growing list.
Yes You can turn any MP3/AAC into a ringtone: http://www.dvd-video-to-iphone-converter.com-http.com/use-mp3-as-free-iphone-ringtone.html
Yes and here is how for free 1)in preferences go to general, import settings and choose aac as the import format 2)Go into any track in itunes 3)Right click and choose info 4in options pick the 20 to 30 secs you want as a tone in the start and stop times 5) click ok 6) right click on the tune again in itunes and choose convert to aac 7)find this file in your drives through explorer 8)rename teh file to be .m4r rather than .m4a 9)at this point i suggest movingthe file to a ringtones folder just so you know where they all are 10) go to itunes and import the file 11) it is now in your itunes ringtones folder and can be moved to your phone all for free