This error message is displayed when the setup routine cannot find the username that you specified for the heartbeat agent. There are two ways to solve this problem:
Leave the username and password field empty which will cause the setup to use the LocalSystem account. You can always change the account name later (if even necessary) and proceed with the setup. To change the account later open the "Services" application in the "Administrative Tools" and change the service account in the Log On tab of the service properties.
Make sure that you specified a valid username in the form DOMAIN\Username. If the user account is not member of a domain then you should specify COMPUTERNAME\Username.