Your wiring is correct - HOT line from plug to one wire on the dimmer, then the other wire on the dimmer to the heater. The NEUTRAL line from the plug goes directly to the heater. So, the dimmer is wired "in line" with the HOT lead.
The HOT lead on a polarized plug is the wire connected to the NARROW SPADE of the plug. The NEUTRAL wire is the WIDE SPADE of the plug.
Dimmers are not variable resistors, so measuring resistance gives you no info. Dimmers do have a low wattage variable resistor connected to the trigger of a triac. A small voltage on the triac trigger (varied by the dial) controls when the triac fires during the 60HZ cycle. The dimmer actually controls the ON TIME of the output within the 60 Hz sine wave. It varies POWER, not voltage, to the load (heater).
Here is how:
Normal 120 VAC is a sine wave that goes from 0V to 120V back down to 0V then down to -120V and back to 0V in 1/60 of a second. With a dimmer, the output will stay 0V until the triac fires, then the normal sine wave will ensue, but only portion of the curve goes to the load. So, the voltage per time is varied, and hence the power to the heater.
Look it up on howstuffworks.com.