Here is the correct syntax. I did not understand that --device is not the cpu.
(Background, design with two nios2 cpus. cpu1 to run uClinux, zImage file made using Linux toolchain, cpu2 to run stand alone C application, image is (say) cpu2code.elf made using nios2 IDE under Windows. )
In Windows launch nios2 shell.
[SOPC Builder]$ nios2-download --device 1 --instance 2 -g cpu2code.elf
cpu2 application starts to run
[SOPC Builder]$ nios2-download --device 1 --instance 1 -g zImage
[SOPC Builder]$ nios2-terminal
/> (prompt from uClinux running on cpu1)