My parents used to have the optionnal gasoline heater in their late 60's VW Beetle, but it seems this system was not the best they have seen... There was no control on the heat degree (it was either 'on' or 'off'

, so after a few minutes, the cabin was so hot that they had to turn-off the system (and since there was only one hole to blow the heat (near the floor, on the passenger side)) it was impossible to decide where the hot air had to go...
So you were right, this system has really existed!