The litmus turns blue because you're pushing it down the test tube where you just added NaOH.This is why it is the sides of the paper that turn blue. The litmus should be at the top of the tube.
I actually can't find any data for the energy changes associated with this reaction - but yes I'd assume it was somewhat exothermic. The heat is added to increase the number of particles with at least the activation energy aka to get the reaction going!
