What to do about a returned phone that ATT claims they never received.

The phones are identified by their IMEI. If when you received your insurance replacement you never corrected the IMEI they are indeed looking for the original 64 gigabyte phone. It may have something to do with them both being in the same package.

You were given a sticker to mail your phone's back. Each sticker identifies the account and the phone line  the phone inside belongs to. Unless you put both stickers on the outside of the box, but even then they may have scanned one sticker and not the other sticker.

      And since the IMEI on the new 256gb phone does not match the one that AT&T sold you they cannot put this random phone together with your account.

    Major problem. Huge.

You can try filing a Better Business Bureau complaint and see if that will encourage At&t to look for that 256gb phone a little harder, but if I were you I would keep my fingers crossed on both hands.

You sent them to the wrong place🤦‍♂️

Just finished speaking to them, they were able to locate the phone by the IMEI number. Yes it was because they were looking for a 64GB iPhone and had no idea it was upgraded to a 256GB during my insurance claim 2 years ago. So they have removed the pending charge. 

Awesome!  I'm stunned and thrilled for you.