Well, I'm not Catholic, but the interpretation of "no graven images" is fairly variable among people who follow the Old Testament. Muslims take it to mean that representational art in general is forbidden, which is why most Islamic decorations are geometric, rather than representational. When I was a kid, we were taught that this was part of the "other gods" thing, and referred to the practice of making images and worshipping the images. Primitive peoples often believed that the image itself was the "god"; when they worshipped a golden calf, it wasn't as a "representation", it was the calf itself.
However, if you read the whole passage, it's clear that it refers to *worshipping* images, not to *making* them. So, for instance, the Mona Lisa isn't a violation of the 1st commandment; it's just art.
I have no reason to believe that Catholics worship graven images. Catholics may use graven images to help create a worshipful mood, but when I was a kid, in a Lutheran church, we had stained glass windows depicting all sorts of Biblical things, and this was considered perfectly normal.
I guess you're getting back to the whole "icon" debate, which started quite some time ago. It seems, frankly, like a pretty stupid debate to me. No one is worshipping graven images; people are worshipping God, and praising His glory, and it helps them to have images of God, angels, and saints, to help focus their thoughts. This strikes me as no different than the beautiful multi-panel stained glass image of Jesus leading a flock of sheep we had in my church when I was a kid.