I have seen people post that they have a customer buy a cd with a song they would like used in there project. Then it can be used for them only. Is this true?

no.

No matter how you slice it, it's still illegal.

THis has been rehashed in several threads. Do a search and read the why's and whyfores...

I'm sure it is true that they do it, but it is still illegal.
Check out the Business Forum here, there have been dozens of threads on this, just do a search and you'll have all the reading material you need.