Why I can not see the alt_printf("xyz") output?

Yeah, that definitely is weird. If you want to change where stdout is redirected, you can do that in the BSP Editor (Right click your BSP Project->Nios II->BSP Editor). The stdin, stdout, and stderr redirection options should be on the root node of the tree that pops up. By default, it should be connected to the UART/JTAG UART that you instantiated inside of Qsys. Another thing to try would be to include <stdio.h> and use the regular printf. I know the alt_printf is a dumbed-down version of the regular printf, so maybe the regular printf will work.