I haven't fooled around with this setting for a while. I remember being able to set my alert sounds as ringtones for my contacts without formatting the sounds as ringtones. Does anybody have this phone for Verizon and know how to do what I'm asking?
I figured out the answer to my own question. You can use sounds as ringtones but it's very unintuitive.
Menu> Media Center> Music and Tones> My Sounds

Now click a sound name and then "set as". You can set it as both a ringtone and an alert tone.