OK I downloaded the wavepad sound editor as Audiko.net didn't have one I was looking for.
It worked a treat, however I used a different workflow than given by the OP, mainly because I didn't remember all the details:
Step 1: Load original Song
Step 2: Select snippet and Copy to New This step took a while to get the loop to work well.
Step 3: Save Untitled as Snippet.m4a
Step 4: Rename .m4a as .m4r in Finder
Step 5: Drag the renamed Snippet.m4r into itunes
Step 6: Connect iPhone and allow it to sync.