Rickman,
You are overthinking things. What he meant was that he wanted a native J1 Forth system instead of the cross Forth system most projects were using. So you would connect a terminal to the FPGA board and would see an "Ok" prompt and then you could define new words by typing ": name ...." on the terminal. You would also be able to try simple expressions like "3 4 + ." and see immediately what they do.
With cross development you type in your program in some editor on your PC, run the compiler and get a bunch of bits to be loaded into the FPGA board. You turn on the FPGA board and see if it worked or not. If not, you got back to the editor on your PC and start the whole cycle again. This works, but it is not how Forth was meant to be used.
-- Jecel