Yes, the
ABD pre-night rate includes the hotel transfer (which is ESPECIALLY nice after an over-night flight) and also includes breakfast with your rate (may already be in the Expedia rate you are being quoted since it is more common for European hotels to include breakfast). I believe it also include all taxes, etc., but would double check on that.
Frankfurt to Heidleburg is around 40-50 miles, if I recall, so don't know what other options you might have. A taxi would surely be outrageous, and a train would be a hassle.
We did the pre-night in Heidelberg in 2008, and I recall it being MUCH more reasonable - like around $250. I was very glad we did a pre-night. When we went to Alaska in 2009, I recall that the pre-night was over-priced IMHO, and the ABD hotel in Fairbanks is close to the airport, so may not be worth the perk of being picked up by ABD. We instead went a day early, stayed overnight in Anchorage (at a hotel that offered airport transfers), then flew to Fairbanks the next morning and rented a car for the day. I loved all the things we did on our own before meeting up with ABD that night at the rental car return at Fairbanks airport!
So bottom line, I don't think the rates are very competitive, but if you want to stay at the hotel in Heidleberg, you may not have a lot of choice, given transportation complexities. Depending on how adventurous you are, another option might be to stay in Frankfurt near the airport, then meet up with ABD the next day at the airport.