Remote update controller issue

I cannot see that you do anything wrong, its correct to shift the address 2 bits right. Here are some ideas to further debugging:

1) Do you disable the watchdog ? (0 to parameter 3 of altremote_update)

2) Read out and check the registers of altremote_update before and after you try to restart in application image. Note that its confusing which value to use for read_source for Cyclone III/IV. I have come to that read_source shall be 0 for parameter 1 (Current image), 2 for parameter 4 (Boot address) and 1 for parameter 7 (Config source)

3) Make the configuration and software different for factory/application image so that you are sure that you looking at the correct image.

4) Verify that you have written the flash correctly.

5) Use signaltap to see what is happening

In your final design its a good idea to check the application image on the EPCS flash before restarting to it from factory image.