It's quite strange that if you put a breakpoint within alt_epcs_flash_init() it doesn't break... I tried that and I got break there.
I'm sure you verified it, but just to be absolutely sure, use the IDE as editor and check that is defined part of ALTERA_AVALON_EPCS_FLASH_CONTROLLER_INIT macro with alt_epcs_flash_init and not the other; if it is, there is no possibility that you can't break there.
Just as an attempt you could try disabling small driver.
As you would agree with me, without initialization device is not registered (alt_flash_device_register) and cannot be opened. I think that once you get a correct initialization of device it will start working. :)
Ciao