Illustrator 3.0 pathfinder not working

As a created cloud member, I was made aware of an update being available for illustrator.  But after updating to Illustrator to 3.0, the pathfinder tool no longer worked.   I wanted a shape atop an image to be subtracted by pathfinder.  However pathfinder in illustrator 3.0 would not subtract the shape from the image below, nor perform any of the ten features of pathfinder. I've tried resetting the illustrator preferences, tried changing the file apperance, and tried using pathfinder in newly created file.  None made any of the pathfinder features work.  Is there a work-a-round or a fix for this bug with pathfinder in Illustrator 3.0? The pathfinder of  my previous version of Illustrator worked just fine before I upgraded.

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