The package upgrade wizard only upgrades the package, not the config file.
In this case, your config file is specifying a provider name that's no longer the correct version, so it's overriding the value in the package.
Two possible solutions:
1) Edit the package configuration and rather than exposing ConnectionString (which includes the driver details), expose ServerName, UserName, Password etc. instead.
2) Change the ConnectionString in the config file to reference the correct driver (SQLNCLI11)