Yes you can use biodiesel to heat your home... Taylor Oil which delivers home fuel oil to several northeast states actually has been mixing 5% biodiesel into ALL the fuel oil they sell at no extra cost.
http://www.tayloroilco.com/location.html
If you're going to use more than that percent range, one thing to be aware of is that since biodiesel is a solvent if you have an older tank or furnace, it will clean out your lines, so be aware of clogging as those deposits are freed up.
The other issue is unless you're making it yourself, it will usually be more expensive that fuel oil costs now.
hope this helps!
Paolo
(running B100 in 82 240d)