cygwin1.dll corrupts Nios IDE

I can no longer compile a windows executable with Nios IDE after having put the cygwin1.dll in the design directory. I get numerous errors referring to include file objects. I get the same error when I use a DOS command line but the errors go away when I remove the DLL from the directory. However, they don't go away with Nios IDE. In fact, I re-installed Nios IDE and still have the problem!

Any help on recovering Nios IDE?

Thanks,