Your freewheel appears to have about a 28T large sprocket; your derailleur should be able to handle that fine.
If your SunTour derailleur does not pivot on the upper bolt, it may be that it is mounted incorrectly. There is a slotted lockring on the back of the upper bolt. This should be set loose enough for the derailleur body to pivot on the upper bolt, but not so loose that the fit is sloppy.
The lockring bears against the mounting claw, and a thin nut should be on the back side of the claw to secure the assembly.

For best shifting, also check that the "B-screw" is set to allow the parallelogram to pivot forward so that it is parallel to the chainstay.