I borrowed the S207 materials a few years back while trying to decide whether to do a maths or physics degree with the OU.
I decided to do maths.
S207 could be heavier on the maths, and I'd also rate it as containing an amalgam of first and second level physics.
In my opinion, the big step up in the OU maths and physics degrees comes in going from level 2 to level 3, and S207 would prepare a student well for it.
MST209 is a great course - when I was thinking of transferring to a brick uni, the admissions tutor confirmed that completing MST209 and M208 (pure maths) covered a large wodge of "brick uni" second year maths.
The only grumble I have from MST209 is that so much stuff was covered that it was difficult to really really get on top of everything so that it was properly learned and stored in your head.
I can confirm that the OU maths degree is sufficient for admission onto MSc financial engineering programmes (subject to certain module choices). I can't comment on the physics but am aware that some students have successfully moved on to MSc programmes at decent unis following an OU physics degree - again, picking the harder complemetary units such as MS324 would improve your chances and maths.
Not sure if that helps, or not and you're right to check whether it's rigorous enough. I've not heard of complaints or shortfalls though.