It's not as simple as just renaming it, you'd have to convert it.
I don't think a .wav would prevent you from playing it as a ringtone. All of mine have been .mp3s, but as a test I converted a ringtone to both mp3 and wav. Both worked for me.
There should be 3 folders on your root of your sdcard for sounds Ringtones, Notifications, and Alarms. If you want to add ringtones, put things in the /sdcard/Ringtones/ folder. In this case you don't want a ringtone, you want notifications. Put the .wav in /sdcard/Notifications/ and then try selecting the notification tone again.