Debugger launch failure

I am working on a nios based design using a EP3C25. I was initially using the Bemicro dev board for test and debug and everything was fine, but now I am trying to work with the custom hardware and cannot get the debugger to launch.

I can load the FPGA image via the JTAG (using USB-blaster) just fine. When I try to launch the debugger, it goes through the compile, then when launch progress reaches 57% it stalls. After about a minute, the console does report the code having been loaded:

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Using cable "USB-Blaster [USB-0]", device 1, instance 0x00

Resetting and pausing target processor: OK

Reading System ID at address 0x00022000: verified

Initializing CPU cache (if present)

OK

Downloading 00010000 ( 0%)

Downloaded 19KB in 0.3s (63.3KB/s)

Verifying 00010000 ( 0%)

Verified OK

Leaving target processor paused

--- Quote End ---

At this point a pop up window says:

--- Quote Start ---

Error starting gdbserver - see console for details

--- Quote End ---

And in the console:

--- Quote Start ---

Using cable "USB-Blaster [USB-0]", device 1, instance 0x00

Processor is already paused

Reading System ID at address 0x00022000: verified

Listening on port 4720 for connection from GDB: timed out

Leaving target processor paused

--- Quote End ---

There is a 60 second countdown before the listening port times out. During this whole process the blue light on the USB-blaster is on, and it stays on after the process has timed out.

If I just try to run the code, it again hangs up at 57% for about a minute, but then loads the code and the nios begins running it. However, the blue light again is on continuously during this process and after it completes.

I found the erata for an older version of the nios IDE that suggested disabling antivirus software, but it makes no difference with this problem

Does anyone know what could cause this?