When it doesn't sound so simple

As Faith struggles to learn to read, I've been telling her to sound out the words. That's fine when you hit something as straight forward as "cat." But what about when it comes to a word like "was?" Phonetically it should be spelled "wuz." When she struggled with the word "that" she was sounding it out as "t-hat" instead of putting the t&h together as one sound. I don't mean to confuse her but I can imagine that's how she feels. Last night when she was reading to us, I noticed there are words that she has learned that she stumbles over. I told her there are many words that you just have to memorize and forget about sounding them out. What's even more dangerous is that I see her get frustrated that she doesn't know these words. Then she gets discouraged. I really want her to be open to learning and not shut herself down. She wanted to give up as she was reading her book. Now I am want to come up with a way to motivate her to continually study her list of words. She has a tendency to think she already knows words she learned a couple of weeks ago, so she doesn't want to review. Perhaps setting up a regular time to study even when she doesn't have homework will help her on her way. Any ideas on how to spell relief?

-Liz