1. you should select "rs232" if you desire to use an external UART
    2. you should select "debug_module" if you desire that the XMD_UART works as local UART through the JTAG connection
Demo program (running on MicroBlaze) will work even in case the UART port is left unconnected: it is not necessary to use a USB/Uart converter or Uart port on a PC, if you are using XMD UART HDL block.