If you go to settings - sounds - ringtone, there are options that come up. It will be different on each device depending on apps installed.
My options are android system, es file explorer, go sms pro, and zedge.
Zedge will only choose songs in zedge ringtones, android system will only choose those in ringtones, but es file explorer and go sms will choose from any directory on the device.
You only have to have songs in the ringtone folder if you want that song to show up under android system.
Duh! You are so right. You will be prompted for any app that can set ringtones, until you set the default (which is what I did and why I don't see the options).