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I am trying to punch the shape out of the lower image with path finder and I'm having no luck at all. Any suggestions as to what I could be doing wrong?
Have you actually expanded the pattern or is it pixel-based? This may require to use knockout groups or a completely different workflow, given how complex it looks.
While wondering what the difference is between the sceenshots, and what (maybe the black triangle) is to punch out which part of the lower image, I believe you will be happier using an Opacity Mask.
You can, if it the black triangle (otherwise do it with the punchout path/object):
1) Move the black triangle to fit wher you wish to have the punchout, you can lower its Opacity temporarily to see exactly what you are doing, remember to reswet it to 100%;
2) Select both triangle and the formerly lower image, then in the Transparency panel click Make (Opacity) Mask with both Clip and Invert Mask unticked.
This works with both vector and raster artwork, and it is related to the Knockout Group suggestion by Mylenium.