It looks like you indented so_far = new too much. Try this:

if guess in word:
    print("\nYes!", guess, "is in the word!")

    # Create a new variable (so_far) to contain the guess
    new = ""
    i = 0
    for i in range(len(word)):
        if guess == word[i]:
            new += guess
        else:
            new += so_far[i]
    so_far = new # unindented this

Because in the second while loop you're incrementing j without checking if you're at the end yet.

Also, s[j]!='' will always be true for strings. If you can use the index operator on a string it means that there are characters. Otherwise there are none.

For example:

s = ''
s[0]  # IndexError, there are no characters so there can be no index

s = 'x'
s[0]  # Will be x and s[1] will give the same error as above

A little simpler version of your code (not really Pythonic, would be nicer to use lists and use ' '.join()):

s = 'abcdef ghij klmn op qrst uv w xy z'
print s

p = ''
i = 0
word = ''
while i < len(s):
    c = s[i]
    if c == ' ':
        if p:
            p = word + ' ' + p
        else:
            p = word

        word = ''
    else:
        word += c
    i += 1

print p

And the clean/simple Pythonic version with split:

s = 'abcdef ghij klmn op qrst uv w xy z'
print s
p = ' '.join(s.split()[::-1])
print p