How to set ringtones for specific contacts

you need to copy all of your contacts from the sim to the phone again.  Full customization is only available if you do this.

Go to "contacts"
choose your "options" button in the top right and choose "view settings"
Copy all contacts to phone.
Power down the phone, remove the battery, wait 30 seconds, reinsert and restart (this will solve a common address book glitch.)
you should now have two of each contact showing.
go to the options in your contacts and select "phone only"

you should be able to add pictures and ringtones to your contacts at this time.