Song Sender allows you to pick a song from your iPhone's song library and send it to a friend via email. If you'd like to use a song from your library as a ringtone, you can do that too. Install the package into your iPhone using your favorite installer application. When run, the software reads through your library, creating a scrolling list of your songs. Tap any song and you'll be prompted with three choices: play it, send it by email, or add it to your ringtones.
It practically reaches Zune-levels of squirting functionality! Small print: Fair use only. This software is not intended for pirating purposes. Use your powers for good, not evil. Do not take internally. Software is not a substitute for advice provided by a doctor, lawyer, or the EFF. In case of rash, itching, or swelling seek medical attention immediately. This software was brought to you by the letters E. r. i. c. and a. Do not use SendSong to install iTMS-purchased tracks as ringtones.
Update: Version that does not rely on whether you've installed /bin/cp is found here.