Hyperterminal is just showing you the data that is returned from the Uart (from your Nios software), and allows you to send data over the Uart (to your Nios software). It is very easy to do indeed, however I though that you were going to write C code to talk to the Uart on the PC side directly. If you need to do simple debug then I would stick to Hyperterminal to do communication back and forth, however if this is something that needs to be in a final design, then it's worth it to create a C application that handles the Uart instead of hyperterminal.
sdp. It sounds like if you were able to write to the serial port then the reading part shouldn't be too bad. What compiler/OS are you targetting with your app? To keep things simple for now you can test your app on it's own but taking the serial cable out of your PC and shorting pins 2 and 3 together (make sure you short the correct ones). What this will allow you to do is send data out (which you have already figured out) and see if it comes back properly (you are shorting tx and rx together to do a loopback). If your serial cable has a male connector (pins sticking out) on the side you want to short, then I find most PC jumpers (or shunts whatever you want to call them) happen to fit over those pins just nicely
http://forum.niosforum.com/work2/style_emoticons/<#EMO_DIR#>/smile.gif (sometimes with hardware you have to be like the A-Team)
If I can find some software I made a while back that does a really simple read and write I'll email it to the both of you and save you the trouble. If I find it make sure you run it on a machine that's windows 2000 or xp because I don't know what will happen on other platforms (the joys of MFC and C++).