Those types of heaters are generally designed to go in line between the lower radiator outlet and the block, not between two connection on the block itself. The arrow should indicate the flow direction, which should be toward the block.
I'm not familiar with that model tractor, but if it's like most, the flow of the coolant is from the water pump pump out through the thermostat and upper hose into the radiator, and then from the lower hose out of the radiator and into the block.
You should be able to cut the lower radiator hose near the middle and connect the heater port where the arrow is pointing in your picture to the hose that goes to the block, and the other port on the heater to the hose that goes to the bottom of the radiator. To make it look nice, and to keep it from dragging and getting snagged on things, you'll probably want to cut some of the hose off and toss it away so the new setup isn't so long that it hangs way down.
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