I swaddled my son. It was a lifesaver, and I will definitely be swaddling this baby as well!
With regards to overheating... I always put him to bed in just a thin onesie or even just his diaper, and swaddled him with a receiving blanket (not very thick). If I felt that wasn't going to be warm enough, I would drape a warmer blanket over him, from his lower chest down, well away from his face. He only got a heat rash once, and that was in the early days when I swaddled him with too thick of a blanket. Also, the receiving blankets work nicely, because they're not too stretchy so they stay snug.
I swaddled DS for about 4 months... basically until he was breaking out of it on his own. My sister swaddled her daughter for six months... they'd literally tape the swaddle shut so that she couldn't get out. That seemed a bit extreme to me... but it really does help them sleep better!
If you're really not sure about it, look into the book "The Happiest Baby on the Block" ... Kent Harvey is the author, I think. Its amazing... gives you all the reasons to swaddle and then tells you how to do it properly. It takes some practice, but I am very excited to be able to wrap up another baby all nice and snug!