First, are you using your own UART driver or Altera provided UART driver?
If "reduced device driver" or "small driver" is enabled, it doesn't use the ISR routine altera_avalon_uart_irq(). Instead, it will use the polling mode. For example, when you try to read or write something to UART, it will block the program (while loop), until it can send or receive any data from UART.
You can try to read the source code for altera_avalon_uart_write() and altera_avalon_uart_read() routines under the# if defined(ALT_USE_SMALL_DRIVERS) || defined(ALTERA_AVALON_UART_SMALL). You can understand more.