Yet still, correct me if I'm wrong, many Christians still follow the old testament.

Again Protestants have tended to look more to that book for instruction which is why you have people springing up in the 17th century in England and elsewhere with names like 'Ezekiel' and 'Zedekiah' and so forth but the orthodox interpretation of the OT is complex and it's not at all taken as a prescriptive book of morals in its whole. There's incest, mass slaughter, rape, polygamy and whole raft of other things in the OT that no Catholic or Orthodox Christian subscribes to.

From my research 'chosen people' comes from the Book of Deuteronomy which was composed in Jerusalem in the 7th century BCE. This belief could well have been common amongst them before this interpretation.

Yes see dual covenant theology which is the basis for things like Christian Zionism. It's a heresy and no Catholic -- Nostra Aetate notwithstanding -- can agree with the idea that the people of the Holy Covenant aren't Christians alone. In Orthodox and Catholic teaching the 'Chosen People' are literally Christians. It's called in Covenant Theology supersessionism and the idea is that the covenant of the OT has been superseded by Christ's covenant with Christians. In fact there are entire debates in the New Testament including ones between Jesus Himself where he rebukes his disciples for attempting to make the faith one meant only for Jews. It's actually an ongoing debate in the NT and a source of conflict which was ultimately solved until the arrival of Protestantism 1600 years after the fact.

Christianity wasn't created to make the Jews the 'Chosen' in fact it's the opposite.