The problem here looks like ld is being used to link, if gcc were used to link, the correct multilibs would be picked up (there is a different C library depending on whether you have hw mul or not) and the gcc support library would be linked in (which provides functions for operations the processor does not handle natively, e.g. divide, multiply, floating point operations). The name of that library is libgcc.a and is located (depending on multilibs) in this directory structure: <KIT>\bin\nios2-gnutools\H-i686-pc-cygwin\lib\gcc-lib\nios2-elf.3.3
Jonah