an 8 watt heater should be ok in a gallon of water since it's supposed to take 5 watts to heat up 1 gallon of water. If its a preset heater - normally they are set to 78 but in my experience they only heat the water up maybe 5 or so degreese more then the air temp.
I would either keep the heater in or keep it out-going from cold-hot-cold can lead the way for bigger health issues.
You can use prime or amquel plus to reduce the ammonia in the tap - they will change it to some other chemical that is harmless - ammonium I think? it will still register as ammonia on a test because of the way the ammonia test is designed but it wont be harmful to the fish.