So I am trying to knock out the foreground object, in this case, it's text from the design. But it's not doing exactly what I want. I would like to do it creating outlines since I want to unite another object to this eventually. however, I am having a hard time, cause it seems to only knock out part of the text and I am not using a stroke as it is transparent now.
You have a 9pt stroke applied to the white rectangle. It's causing the extra weight after you cut out the outlined words. If that is your issue, just remove the stroke - to be sure you did it just set the stroke size to 0.