the caveat - you must use the latest version of garageband.
but, this now allows you to make ringtones out of your own music (any mp3 file you already have) and transfer them automatically to itunes to load onto your iphone.
apparently, it still reserves the conversion of aac files purchased from itunes for itunes itself (still requiring an additional $.99 to buy one).
ilounge wrote up a
tutorial already. i don't have garageband '08, but this actually tempts me to buy it...