Elna 2800 makes noises when flywheel engaged?

I plugged in and setup my new Elna 2800 sewing machine today. However, it makes a terrible grating / clunking noise when I try to sew. I tried turning the flywheel by hand and can feel tension and clicking as I turn it. If I disengage the flywheel to wind a bobbin it's as smooth as can be. The machine still makes the noise when it is not threaded, the bobbin case and needle removed. I was very disappointed and wondered if anyone knew why it was doing this?

Amelia
March 2012