Cutout through image in Illustrator

Hi there,
I am trying to cut out a shape so the cutout would be transparent.
I have two paths and one image kind of sandwiched between them.
At the bottom is a rectangle path with white fill.
On top of that is the image.
On top of the image is another path, which I want to cut out.
But the image corners overlap with the shape that I want to cut out.
So I want to cut through the overlapping image corners and the bottom most path with white fill.
I've tried to use the pathfinder tool, and managed to cut out the shape by grouping the image and bottom most path, then "alt" click minus front, but then the image disappears completely.
Have been trying now for hours. Hope I make enough sense for someone to help.
Thank you!
Rich

Rich,
You may:
1) Set the fill of the top path to white/black (choose either);
2) Select the top path and the image and in the Transparency palette flyout click Make Opacity mask with Clip unticked and Invert mask ticked/unticked.

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