Which hardware design are you using?
If the hardware design that you're compiling the kernel against doesn't have a CompactFlash SOPC component, then IDE support cannot be built in. So yes, you would need to turn off the ATA/ATAPI/MFM/RLL support from within the kernel configuration tool.
If you're using one of Altera's development board's (say the 1s10, 1s10ES, or the 1s40), there is a linux hardware design that you can use the provides all the basic functionality of the standard_32 hardware design + compact flash support.
The linux designs can be found in
.../altera/kits/nios2/examples/verilog/<whatever board you're using>/linux
Selecting the PTF file from the above mentioned directory while creating a new kernel project will allow you to use the default options in the kernel. So the steps you would need to take are:
(1) Create a new kernel project
(2) select a PTF file from the directory I mentioned above
(3) Configure the kernel (taking all default options)
(4) Build the kernel
(5) Upload the kernel.
Let me know if the above steps don't work.