Compilers for Soft Core Processors (as NIOS II)

Recently I browsed through some Alteras Nios II documents. That CPU seems to
have own instruction set depending from the size version. Further custom
instructions are possible to implement.

There are hints for all kind of developement toos including debuggers but I
was not able to find a C Compiler. As far as I understand it is intended
that designers have to use a free GNU Compiler.

As long as soft core processors have own instructions sets, that requieres
own code generators and special code optimizers in any compiler. As long as
many commercial compilers for off-the-shelf processors produce poor code,
one can imagine, that gnu optimization for soft cores will be worster.

If there is competition with more than one commercial compiler for one
architecture, the decision is either project history based or the compiler
with the better code size : runtime performance prevails.

Any experience with soft core compiler performance? Are soft cores a
chicken-egg problem ?