Actualy, both word-orders are correct. But using "Откуда вы?" is preferable. Because it is more polite.
(My native language is Russian, so I'm sorry if I make mistakes in English :) )
I think this is a very large topic to disscus it here. ) There are many articles in the Internet where you can read about it. In this particular case using "Откуда вы?" is more preferable, because when you use a pronoun as first word in a question then it sounds more defiant for us.
I know that it is not exactly the question of this exercise, but what is the difference between от and из?
You use откуда if you are interested where are you from. You are not there at the moment. You use где in the meaning - what is the place where you (or something/somebody else) is at the moment.