While sometimes nios2-download failes due to the wrong SOPCB System is on the board (you get a message like "[...] System ID [...] does not match [...]").
In this case, your problem is that the read back of the memory failed during download.
See
http://www.niosforum.com/forum/index.php?a...t=st&f=2&t=1937 (
http://www.niosforum.com/forum/index.php?act=st&f=2&t=1937) for a similar discussion.
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Actually after looking more closely, you appear to be downloading to a Flash? If so, you need to use a flash programmer as the run/debug cycles use nios2-download to download to RAMs.