Is it possible to set ringtones as my text message notification?

Yes!  It just takes a minute or two and downloading a very handy app.  First, get the song you want on your myTouch.  Then, download an app called Ringdroid.  Open Ringdroid, and it will have a list of the music on your phone.  Select the song you want, and it will allow you to cut a segment of the song that will play when you receive a notification.  When you press the save button, a "Save As" screen will pop up, allowing you to choose to save your sound clip as a Notification from the dropdown.  After that, go to your text messages, press menu, choose Settings, and then Select Ringtone.  Your newly created ringtone should be on the list of notification ringtones.