It should be working. But for some reason, not all of the little holes are getting clipped away. I'm not sure why. Here's how to do it.
1 -- select all the paths, the large one and all the little ones
2 -- Path menu > Combine
3 -- move them over top of the photo
4 -- select both the photo and the path
5 -- Object menu > Clip > Set
Someone else will have to chime in, as to why it doesn't work. I don't understand. As far as I know, it should be working.
Edit
Well, in some places, it's because the paths weren't drawn exactly in the right place. But there are 2 "holes" where they should be clipped out, but aren't.
I suppose, you could use the same process of combining the large outer path with the small path, and after grouping the photo, apply another clip. But that would be less than ideal....unless there is no other solution.