Alright... I think I have a solution!
(1) In my busybox filesystem, I added the following executables from the filesystem packages provided with the Nios II Linux distribution:
<project>/target/bin/agetty.exe
<project>/target/bin/login.exe
(2) I updated my inittab to look like:
::sysinit:/bin/sh /etc/init.d/rcS
::ctrlaltdel:/sbin/reboot
::shutdown:umount -a -r
::restart:/sbin/init
::respawn:/bin/agetty 115200 ttyJ0
(3) rebuilt my filesystem project
(4) uploaded my filesystem project
And I got a login prompt + the usual password prompt. (username = nios, password = uClinux)
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Notes:
To get your hands on the usual agetty and login executables, the easiest thing to do would be to create a filesystem project with all packages installed. At that point, you can pick and choose which executables to copy over to your filesystem project with busybox installed.
My default console is ttyJ0, but you can mod that to be ttyS0 if you're using an Altera avalon uart as your default console.
Finally, I think you can use the busybox version of getty as long as you use the login.exe from the filesystem packages provided with the Nios II Linux Distribution. If you use a different login executable, it may attempt to reference the passwd file which isn't supported at this time.
Good luck, and let me know how it goes.