The second stanza is perhaps the most difficult in the poem in that here the ambiguity of reference is focused. It looks upon the ruined imaged  and speaks of the heavenly sorrow at the tremendous loss:

What pity ‘s this? Oh! Sunshine art! What fall?

Thou that wast more glorious than glory’s wealth.

More golden far than gold! Lord, on whose wall

Thy scutcheons hung, the image of thyself!

It’s ruined, and must rue, though angels should

To hold it up heave while their heart strings hold.

What pity is this: What a thing is here to pity. 

Sunshine art must refer to the original, before it fell. Since Taylor was writing from a rural place in a Northern latitude during the “Little Ice Age,” a reference to sunshine would be especially potent.  

He is looking upon the ruined image which was “more glorious than glory’s wealth./More golden far than gold!” Rhythmically, note the inversion of the iamb to a trochee at the beginning of line 8:

THOU that was MORE GLORiou. 

The inversion of the “normal” order forces attention upon the “thou”. He focuses our attention upon the lost image. 

Jonathan Edwards who was a generation after Taylor, but whose father knew Taylor, writes of God’s glory in Christ (in the funeral sermon for David Brainerd) with similar imagery:

Their beatifical vision of God is in Christ; who is that brightness or effulgence of God’s glory, by which his glory shines forth in heaven, to the view of saints and angels there, as well as here on earth. This is the Sun of Righteousness, which is not only the light of this world, but is also the sun which enlightens the heavenly Jerusalem; by whose bright beams the glory of God shines forth there, to the enlightening and making happy of all the glorious inhabitants. “The Lamb is the light thereof; and so the Glory of God doth lighten it,” Rev. 21:23. No one sees God the Father immediately. He is the King eternal, immortal, invisible. Christ is the Image of that invisible God, by which he is seen by all elect creatures. The only begotten Son who is in the bosom of the Father, he hath declared him and manifested him. No one has ever immediately seen the Father, but the Son; and no one else sees the Father in any other way, than by the Son’s revealing him.

Jonathan Edwards, The Works of President Edwards (New York: S. Converse, 1829), 459. 

The wall is the thus the human being created to display the image of God. God’s image was hung upon the walls. There are shields upon the walls which show the coat of arms of this royal family. But now it houses a treasonous family. 

The closing couplet (lines 11-12) are difficult in terms of their reference:

It’s ruined, and must rue, though angels should

To hold it up heave while their heart strings hold.

“It’s ruined” must refer to the house whose walls bear the image (or at least should do so). But what are we to make of “must rue.” Is that the house should rue it’s loss? Apparently so. But it could also be taken as a cohortative to the reader, you should rue this loss. Both are possible here. 

Angels are sent hold up house. This seems to be an oblique reference to Hebrews 1:14, where angels are explained to be ministering spirits sent out to care for those human beings who will inherit salvation on the basis of Christ’s work. 

We could also read this entire stanza as a reference to Christ in his passion, where he was struck down, killed and buried.  This removes much of the ambiguity of the stanza in-and-of itself. The reader sees this destruction and is called upon the rue the loss of such beauty, while the angels attend to the Savior. And it is angels who “long to look” into this salvation: a salvation which was granted to humanity but not to angels. 1 Peter 1:12.

As noted above, this ambiguity of reference makes theological sense because the image of God which is superlatively in Jesus Christ is by imitation the property of redeemed humanity. In 2 Corinthians 3:18, Paul writes that as the redeemed behold glory of the Lord, the redeemed are transformed into the image which they behold:

2 Corinthians 3:18 (KJV) 

But we all, with open face beholding as in a glass the glory of the Lord, are changed into the same image from glory to glory, even as by the Spirit of the Lord. 

Thus, that image is both Christ and also the property of renewed humanity. 

There is also reference to the First Adam, Adam of Genesis 2 who was created in the image of God and so quickly rebelled against his place of honor.