Ethanol is just a solvent often used for this reaction because 1) the reactants and products are soluble in it and 2) the reaction proceeds at a reasonable rate in boiling ethanol. If your trying to prepare the corresponding primary amine, then a large excess of ammonia should be used. Otherwise, if the concentration of the initial product (the primary amine) becomes comparable to the concentration of ammonia, then the primary amine could react with the starting alkyl halide and a complicated mixture of products could ensue (see this article for a nice description of all the possible products that could be formed if the ammonia concentration is not high enough).
The reaction is typically run at reflux (boiling ethanol). Since ammonia is a gas at room temperature it would quickly escape from the reaction and we wouldn't have a high concentration of ammonia for long. Therefore, the ammonia is condensed into a solution of the ethanol and alkyl halide (usually an alkyl bromide) in a glass tube at low temperature. When the desired concentration of ammonia is obtained, the tube is sealed and then heated to allow the reaction to take place.
