Grinding noise from freewheel after changing the chain

Question

I have Elops 100 city bike:

I changed the chain on it because it had not been changed in years. I used 1/2 x 1/8 inch chain:

I can pedal, but when I pedal there is a terrible noise when I apply pressure.

Is it:

1. The wrong chain?
2. Worn out freewheel?
3. Something else?