What ROM are you on? Different ROMS need their ringtones placed in different places for the phone to realize thats what you want.

 

Try to create a file structure like this:

Media / Ringtones

Media / Notifications

Under the media folder create both the ringtones and notifications folders, place the appropriate files in each folder and your phone should see them no problem.

I've used this file structure since I've had my Hero, I can't remember any roms where it didn't work. I'm sure there are some where it wont.

 

This is the proper way to structure the ringtones and notifications and alarms for your phone. you can check it out under the /system/media folder on the phone as well.

Me I delete everything in the /system/media/notification & ringtone folders and replace them with my own stuff. why well i'm anal like that.

 

set it up how Granite1 suggested. on the SDCARD set up /media/Notifications and then /media/Ringtones place each in proper folder then reboot the phone clear cache and dalvic then reboot phone and go and choose the ringtones / notifications you want. The later is really necessary but does make it nice an clean.

 

yes on the sd card /media/ringtones and thats it should be good to go