UPDATE:
Yep, the ringtones added using the .m4r method are moved out of the ringtones folder to the music library. Still looking for a workarounds.
Hot off the grills, iTunes 7.4.2 is out.
We’ll see if this Update closes the ringtone loophole.
Apple posts iTunes 7.4.1 for both Mac and Windows.
iTunes 7.4 for Mac (38.3MB) | for Windows (49.1MB)
About iTunes 7.4.2
With iTunes 7.4, sync your favorite music and more with the new iPod nano (third generation), iPod classic, and iPod touch, plus create custom ringtones exclusively for iPhone with many of your favorite songs purchased from the iTunes Store. You can now also play purchased videos with closed captioning (when available), easily rate your favorite albums from one to five stars, and watch videos at a larger size inside the iTunes window.What’s New in this Version
iTunes 7.4.2 addresses an issue with creating ringtones using iTunes Plus song purchases and includes bug fixes to improve stability and performance.
iTunes 7.4.1 was released on September 7th.