In the Device And Pin Options window, go to the "Dual-Purpose Pins" and check that the third pin is set to "Use as Regular I/O".
I experienced some Quartus crashes with those options too... On a Cyclone III project, when I set the programming device to EPCS, the DCLK pin to "Use as regular I/O", set the unused pins to "As input tri-stated with bus-hold circuitry", and forget to assign any output to the DCLK pin, then the assembler crashes (on Quartus 8.0 SP1). It took me some time to figure out the combination of parameters that were causing the crash. Maybe I should send a bug report too...