Hi everybody!
I used to have the same problem. When I tried to set an mp3 ring tone for incoming calls or when I tried to set an alarm with mp3 sound, a box appeared saying "This ring tone file is corrupted or unavailable. Please choose a different ring tone." The ring tone defaulted to Ring-WindowsMobile. I use Samsung SGH-i780 PPC with Windows Mobile 6.0 Professional. The problem occurred after installation of .NET compact framework 3.5 or after installation or deinstallation of NoteM 1.21 voice recording software. I have read many posts and come to the conclusion that apart from hard reset of my PPC there is no other useful suggestion on the web So I had to figure it out myself and I did

First thing I have noticed is that I could use *.wma ring tone and alarm sound. So i used Free Mp3 Wma Converter 1.8.0 on my laptop to convert two mp3 files, meant to be used as a ring tone and alarm sound, to WMA format and then I put them it into /My Documents folder, using ActiveSync. Then I could select these two wma files as my ring tone and alarm sound. Good start.

Then I realized that when I clicked on any mp3 file in file explorer, this file did not opened in my Windows Media Player Mobile 10. So I used my Total Commander for Windows Mobile (Total Commander/CE V. 2.51), which by the way is a great stuff, to set default application for opening mp3 files. After "right-clicking" (i.e., holding down the stylus/mouse until a context menu appears) on any mp3 file you can select Properties. Then choose second tab - Open with. Here you should have an antry ".mp3 -> mp3file". If you do not have one, you can add it by clicking on the Open with button and typing: Command: wmplayer.exe (this application is in \Windows folder, so you do not need full path), Parameters: "%1", Icon file: \Windows\wmplayer.exe, Index: 0. Last two options are not essential. Note that %1 must be quoted! Ok, after accepting these settings, you should be able to open your mp3 files with Windows Media Player. Not bad, right?

The second step involves editing your registry. I am going to describe how to do this with the aforementioned Total Commander, which fits this task very well. You should go to the root of your directory tree: \. Then choose \\Plugins\registry\HKCR. First, go to .mp3 folder (you can just start typing letters - Total Commander will navigate you to the proper folder) and enter it. Click on Default - you should see mp3file. Yes, this is one of the results of setting WMP as a default application to handle mp3 files.
Now, the most important part comes! Navigate to another folder in HKCR, called mp3file and enter it. In my case, I had only two subfolders here: DefaultIcon and Shell. By the way, you can see that subfolder Shell\Open\Command contains a key Default with value wmplayer.exe "%1". This is the second of the results of setting WMP as a default application to handle mp3 files. So, coming back to the point - we are in mp3file folder. Now, you should set a correct event sound handler for mp3 files by adding the following folders: Shellex\EventSoundHandlers\{245F94CF-DD9C-46F9-B4C8-D2B14A877893} (i.e., you have to add Shellex subfolder, then enter it and add EventSoundHandlers subfolder and then enter this subfolder and add next subfolder called {245F94CF-DD9C-46F9-B4C8-D2B14A877893}). Note braces in the last subfolder name! Ok, once you are in the subfolder {245F94CF-DD9C-46F9-B4C8-D2B14A877893}, add a new DEFAULT key by hitting New value, then ticking default check box and pressing the OK button. When asked for the value of the new default key, type XME EventSound Player and accept. Now, you should be able to set mp3 ring tones as well as set mp3 alarm sound. At least I was able

Two more notes:
1) The name of the subfolder created in HKCR\mp3file\Shellex\EventSoundHandlers should be identical to the name of the subfolder in HKCR\WMAFile\Shellex\EventSoundHandlers (it seems that wma and mp3 files are handled by the same event sound handler). If you have different subfolder name in HKCR\WMAFile\Shellex\EventSoundHandlers, and your wma files can be set as a ring tone and alarm sound, use your folder name instead of mine ({245F94CF-DD9C-46F9-B4C8-D2B14A877893}).
2) You can reenable an option of setting mp3 file as a ring tone from the context menu. To achieve this, you need HKCR\mp3file\Shellex\ContextMenuHandlers\{...} folder. In this folder add default key with value Set As Ringtone. Check what should be placed inside braces (instead of ...) by checking the name of the folder found in HKCR\WMAFile\Shellex\ContextMenuHandlers. My value is E88B4A18-6F77-4bb6-8E0D-DCD4B1F8F1DA.

I hope this helps. Good luck!