You cannot (to my knowledge) generate a heatmap from an unprojected layer. You will first need to reproject your source data to an appropriate projection with meter mapping units (UTM works). Right-click on your points layer, select `Save As...`, then next to CRS choose either `Project CRS` if your project has an appropriate projection, or `Selected CRS` to select a different projection (See http://gis.stackexchange.com/questions/35590/how-to-reproject-a-vector-layer-in-qgis). After that the heatmap plugin should work correctly.

I recently needed to explain to someone how to use the heatmap plugin, and you may find the video useful:
http://youtu.be/h-zX67ewqC4