I have a similar setup.
I used a 2.5 gallon bucket suspended inside of a 5 gallon bucket. First, I wrapped a 6 ft length of heat tape around the inner bucket, focusing on the bottom half of the bucket - for two reasons. First, this way the heat is more concentrated, and hopefully it causes some convection in the water inside as the lower water heats up, rises, and forces cooler water to the bottom. Second is that when the water level gets lower I am less likely to have heat tape just heating up plastic.
Once I had the heat tape attached, I drilled a hole in the outer 5 gallon bucket for the cord to run through. I set the outer bucket on a concrete floor, and stacked two scraps of 2x4's laying flat, centered in the bottom of the bucket. I then sat the 2.5 gallon bucket on those, to keep it suspended. At that point I filled the cavity between the buckets with Dap Great Stuff Gaps and Cracks expanding spray foam insulation. Once dry I trimmed any overflowing foam from the top of the inter-bucket area so a lid would go on.
Unlike yyz0yyz0 I did not insulate the lid or bottom of the inner bucket (yet). Last night our temperature got down to 19 before leveling off in the low 20's until morning. I used a meat thermometer to measure the water temperature this morning and it was a balmy 49 degrees! The heat tape is supposed to shut off when the contact thermostat registers 40, so I have to assume it shut off and on over night. Due to the insulating properties of the plastic itself, and the fact that the thermostat is near the bottom of the bucket, I'm just assuming that the thermostat stayed colder than the actual water temperature.
I'm confident this setup will keep my vertical nipples flowing down to at least 0 degrees. I'll try and snap a couple pictures later today.