In kernel menuconfig, you should usually select either jtag uart or serial uart for console device (but not both).
NOTE, you can use JTAG UART console during development. But if you don't connect a nios2-terminal, the program will hang. So you shouldn't use JTAG UART console for standalone or production. You must disable JTAG UARTconsole then. You still need a console device after disabling JTAG UART console, otherwise the init task will exit and panic. You may use Nios serial uart as console, or use Virtual Terminal (actually it can be dummy) as console. You should use exactly only one of them for console.

Device Drivers ---> Character devices ---> Serial drivers --->

if you use jtag uart (with a USB Blaster cable) on a nios2-terminal,
[ ] Nios serial support
[*] Altera JTAG UART support
[*] Support for console on Altera JTAG UART

if you use serial uart (with a 9-pin RS-232C cable) on a terminal emulator such as minicom or ckermit,
[*] Nios serial support
[*] Support for console on Nios UART
[ ] Altera JTAG UART support

if you use neither jtag uart nor serial uart, and you might use telnetd or sshd alike, or framebuffer/keyboard/mouse/nano-X, then you can use virtual terminal
Device Drivers ---> Character devices --->
[*] Virtual terminal
[*]   Support for console on virtual terminal

If your user id and group id on Linux are not 500, change these to your id instead. This will be used to map user file/dir ownership to root in initramfs.

General setup --> (for new kernels)
OR
Device Drivers --> Block devices --> (for 2.6.11-uc0)
(500) User ID to map to 0 (user root)
(500) Group ID to map to 0 (group root)

Processor type and features-->(0x00500000) Link address offset for booting.
The zImage load address is ( your sdram base address + link address offset ). The boot loader will uncompress the code to the beginning of sdram. If the uncompressed code is bigger than the default 5M, the two area will overlap and corrupt. The compressed image offset should be adjusted to a higher value when the kernel image is big, eg, large files in romfs dir. You can change this value to about 2/3 of the size of your sdram, eg, 20M out fo 32M. I suggest 2/3 because the gzip compression ratio is about 1:2. The zImage boot loader does not relocate/move itself.

If you can not find Platform board support of your board in Processor features, just use the default.

Serial Uart on NEEK

The serial uart TXD pin is a dual purpose pin, you have to change the pin usage,
Assignements -> Device Settings -> Device -> Device and Pin Options -> Dual-Purpose Pins -> nCEO -> Use as regular IO

   input        HC_UART_RXD;
   output        HC_UART_TXD;  

      .rxd_to_the_uart                              (HC_UART_RXD),
      .txd_from_the_uart                            (HC_UART_TXD),