New application creation failure in NIOS II - Quartus20.1

For me, I was able to fix this by editing nios2-bsp (in C:\intelFPGA_lite\20.1\nios2eds\sdk2\bin). There's a line that checks if you're running WSL:

uname=$(uname -r)
if [[ $uname =~ "Microsoft" ]]; then
_IS_WSL=1
windows_exe=.exe
fi

On line 37, it should be changed to:

if [[ $uname =~ "microsoft" ]]; then

This then causes the script to add .exe to the end of all the executables and a few other things that fixed it for me.