For a start the water in the heater matrix should get as hot as the rest of the cooling system so it sounds like the matrix is blocked or air-locked, get that sorted and you are partway there.
If the matrix is loose in the heater-box then you must get that sorted as air will flow around the (hopefully now hot) matrix rather than through it, use heat resistant self-adhesive foam-rubber strip (available in handy lengths on Ebay) to make the seal.
When you re-fit the heater-box make sure you replace the heater-box to bulkhead seal otherwise you will loose warm air from there, new seals are about