Hi,
I have no problems running the standard KonaKart reports using the standard parameters in the default installation.
However, if JAVA_OPTS, CATALINA_OPTS or DEBUG_OPTS is set in your environment, these will be used. Check these are appropriate for your needs.
You mentioned that you increased your "heap" size to 512M - did you use the Xmx parameter?
You probably need to make sure that MaxPermSize (the maximum size for the permanent generation heap) is set high enough as well - although, as I said above, the default settings (where none of these memory settings are specified at all) worked fine for me.
Regards,
Kate