OHHHH! Do you have a D2G? If so, for a phone that is supposed to only have one thing different form the original, I sure am seeing a lot of differences it how they work!
Now, I vented, so lets look at what we have different. I am rooted, use launcher pro plus and the stock ROM. I use the doubleTwist app for my music player, (cause I use it to sync to iTunes.)
Settings >Sound>Phone>Phone ringtone ...I get a "complete action using" pop up that gives me choice between Android System or Select music (with the stock icon for music) I touch Select Music and get a "Select Music" pop up with the choices: Current Ringtone, System Ringtone, or Music. I choose "Music" and get a screen that says "Music - Select tract" and every song on my phone is choose-able as the ring tone. As an example the first choice I have is "Anything but Ordinary, from the album "Let Go" by Avril Lavigne (08 anything but ordinary.mp3) 4:11.
All my choices are mp3's or M4a's.
If You have D2G and do not get this same set of choices, then re-post on D2G General Issues thread and see what you get for a response form there, or Post the question on Rescue Squad Thread for ur exact model.
I see now that you have 237 posts on this forum which would indicate to me that you have the original D2. So... Why do we see different things in settings?
I'd say you should SBF back to stock and re-root and see, if you get the same pop ups I get. Or if you have D2 Bootstrapper app and saved a back up right after you rooted the phone, to reinstall that back up and see if you get what I get. If so, then add apps and changes you have made and when you no longer get the required responses, you can figure the last one is the offender.