This error may be generated by the Altera Complete Design Suite software version 10.0 and 10.0 SP1 when creating a software project by selecting Nios II Application and BSP from Template in the Nios II Software Build Tools (SBT) for Eclipse on Windows 7 using a non-administrator account.
To work around this error when running on Windows 7, run the Nios II SBT for Eclipse as with administrator privileges. On the Windows Start menu, point to All Programs, point to Altera, point to Nios II EDS, right-click on Nios II Software Build Tools for Eclipse, and select Run as administrator.