usleep Compiled out?

I don't think so. And as the usleep function uses a calibrated delay loop there is no need for an initialized timer for it to work properly. The only think I see is that the function alt_busy_sleep will skip the delay if compiled with ALT_SIM_OPTIMIZED to speed up the simulations, but there is no reason why this would be the case when you convert the code to hex.

Can you make another change in your software and see if it is applied when you put it directly in the .pof file? One common mistake is to use a wrong name for the .hex file or put it in the wrong place and then Quartus just picks up an old version of your software when generating the .pof file instead of your new one.