The cold water could be the entire problem. Betta fish can get very lethargic in cooler water. Any idea what the water temperature is? If not, you need to get a thermometer with that heater. Never put a heater in a tank without a thermometer.
But first off, clean his tank. Anything new in the tank can make them sick if it isn't washed off well enough, so I'd definately rinse those rocks a bit more as well.
And how many gallons is this tank? If it's under 2 or 2.5 gallons, you're going to have trouble finding a proper heater for it.