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The fact, that no Open Drain option is actually set indicates, that we are experiencing a Quartus bug in this case, to my opinion. Also, a basic oddity is this: Although the Starter Board is using AP configuration, you can't set AP configuration in Device Options without generating a shower of errors. The example designs shipped with the Starter Board have their configuration set arbitrarily to AS, seems to be some kind of bug work-around.
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The CycloneIII starter board has the MSEL0-3 bits tied to ground. Does this not set up the device for JTAG configuration? This is not an option in Quartus, and I figured that AS was the next closest thing.