If you download your software through JTAG (which is the case when using "Run as Nios II Hardware") you should just put all your sections to the main RAM (which is SDRAM on your project). If you have some sections in Flash then the nios downloader will attempt to write data to flash and will fail with a verify error. The .text section is the one containing the software itself, .rodata is for the constants (the strings for example), .rwdata for global variables that are initialized to a specific value in the code, .bss for uninitialized global variables, .stack for the main stack and .heap is the memory section that can be allocated with malloc().