I agree with Lola, I have a 5 gallon and I use a 50watt heater and it works beautifully. Heaters have thermostats in them so unless it is severely OP (overpowered), it won't boil the water or anything.
I think 25watts is perfect for a 5 Gal, I don't remember :P
As for his flaring "problem" what is the lighting like? Are all your house lights on/off and his are on/off? If his are ON and yours are OFF then the lighting will bounce back into his tank (similar how when it is night-time outside and your lights are on, you can see your reflection in the window).
Also, even though we see a reflection on the walls, their vision is all clear (unless in the situation above). No tanks cause total internal reflection...at least, none that I know of with the specific reflection angles.
He's also probably just excited. I know HongBo did that for a few hours a day for about a week >_>