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 Reprojecting 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