AFAIK, the iPhone is incapable of playing MIDI ringtones, as I believe all of the stock ringtones are audio files. One way to convert them is to open them in GarageBand (Mac only unfortunately), then go to the Share menu to export it as a ringtone. Otherwise, QuickTime Pro will also enable you to open the .mid file and save as audio (QT used its own MIDI synthesizer to play the MIDI data).