Hmm, ok it works. Exactly the same file that I transferred that didn't work, I put on a web site and accessed it via WAP. This downloaded and was selectable as a ringtone. The only thing I can think of is that if you could easily transfer an MP3 and use it, it could damage the 'thriving' ringtone business. So they make it a bit harder, so only technically minded people could do it. Well, whatever the reason here are the facts.
You cannot transfer an MP3 file via bluetooth and use it as a ringtone. It will transfer and you play it till your hearts content, but you will not be able to select it as a ringtone.
You can upload the said MP3 to a web site via FTP and go to this web page using the WAP browser and download it. This method WILL allow you to select the MP3 as a ringtone.
Hope this helps. I will post a segment of this message as a new thread in case people dont look at this thread.