Yeah...you have to copy the file (mp3 or whatever) into the root ringtone folder (either with astro or connected to the computer via usb). Then it'll show up int he ringtone list as an option.
That's where an app like Ringdroid really makes the whole process easy. It displays all of your music tracks when you open it, just select the one you want and it takes you to its editor, with the file primed to edit and then save the file, selecting ringtone or notification, and even assigning it to an individual contact, if you wish. Doesn't get much easier than that.