Multicycle custom instruction repeated calls, hangs, signals

I have litte, very little experience in Nios II but I tell you what I learn with trial and error method. When you place a Nios processor in SOPC builder you have an CPU ID option. Click on it. The USB Blaster don't establish a good link with your processor without this.

Place a system ID component in SOPC builder. With this you avoid the sys ID mismatch but ignore the timestamp mismatch ID when you download the firmware ( unless you have a timer component for timestamp activities ).

I see you vhdl code. I assume it is not a testbench, so why do u use metavalue U?:

RESULT <= (others => 'U'); -- ***

DONE <= 'U'; -- ***

this is intended only for simulation. It has no sense in synthesis. Assign ( others => '0' ) or something like that to RESULT when reset take place.