Low-side switch MOSFET cannot deliver full voltage
If you add V1 and V2 you get 2.7V.  Unless there's some other source of resistance in the circuit, that's the battery voltage under about 0.534A load.  That's not much load for the 18650, unless it's severely aged or fairly completely discharged.  Measure the voltage directly across the battery terminals while the element is active; if it reads near 2.7V try recharging it.  If the same thing happens when fully charged, try a different battery.

If you see more than 2.8V across the battery, I suspect another source of resistance in your system, possibly a bad connection.  If it's localized, use the voltmeter to track it down.

In any case, your MOSFET is working fine.