Can you show us the layer properties of the two inputs, in particular their projection and extent information? What were your steps to project the data to UTM? It might help if you clarify what you mean when you say, "viewshed takes no account of the radius". Viewshed doesn't clip the output by the radius value. Everything outside the value should be returned as non visible, but you're still going to get the full extent returned to you. Now if you're seeing 'visible' cells beyond the radius 2 value, then there is something gone awry or there is still a unit mix up somewhere.
Best,
Eric