How does the "church" reconcile breaking the 2nd commandments religiously?

The 10 Commandments is part of what the NT would call the Law. Please read the verses below to see the purpose of the law.

because by the works of the Law no flesh will be justified in His sight; for through the Law comes the knowledge of sin. Romans 3:20

nevertheless knowing that a man is not justified by the works of the Law but through faith in Christ Jesus, even we have believed in Christ Jesus, so that we may be justified by faith in Christ and not by the works of the Law; since by the works of the Law no flesh will be justified. Gal. 2:16

I do not nullify the grace of God, for if righteousness comes through the Law, then Christ died needlessly.” Gal. 2:21

While the law was God's commands it had very specific purposes. 1. It revealed the Holy Character of God. 2. It was for the benefit of mankind. 3. It identified sin. 4. Identifying sins exposes our need for a Savior. The law however did not have the ability to make a man righteous.

All of this to say, a person only becomes a Christian because they have been convicted of breaking God's law, realize that they are a sinner, and they trust the savior. On this side of eternity believers and churches will struggle with various sins. This however does not excuse the sinner from the sins. You will notice that about 2/3rds of the entire NT was written to believers (who we will see in heaven) calling out their struggle with various sins and encouraging them to lean on Jesus and turn from those sins.

I do agree that there are many sins like idolatry that believers in churches commit that are extremely frustrating to me however I also realize I'm still a sinner that struggles with various sins as well. We are a work in progress until Jesus changes our physical bodies into something new.

For that vast majority of Christians that do not prohibit images, this is an easy question to answer. The original wording of the 10 commandments did not prohibit all images - it was intended to prohibit the creation of idols for worship, i,e, man-made things that were used as Gods, which was the common practice of Israel's neighbours. That it ws not intended to prohibit the making of all likenesses of living beings can be seen from God's instructions for the creation of the Ark of the Covenant, which includes such likenesses.

It is fortunate for us that the creation of images is not completely forbidden, because that would also forbid all photography, movies, drawing etc. - for the commandments do not only apply in churches, they apply to all parts of life.

Images and likenesses in general are not then forbidden by the second commandment. What is forbidden is worshipping these images (or anything else). But Christians in such churches do not in fact worship such images. They are not intended to be worshipped. The images in churches are there to remind the worshipper of God, to focus their thoughts on God or a particular aspect of him, just as a cross at the front of a church does. Many images illustrate aspects of the gospel, and older ones may date from a time before the majority of the congregation could read, and so pictures were necessary to remind them of the gospel. Assuming that the intentions are followed, there is no problem. It should also be said that many Protestant churches do keep their churches free of human likenesses, so as not to offend those who prefer not to run the risk of the meaning being misunderstood.

Most of the above is written from a Protestant point of view, but apply in general terms to Catholics and Orthodox. I have links above that will give you more details from a Catholic and Orthodox point of view.