First, I'd like to say I'm currently attending UWO (in physics of course), so my post might be biased in favour of UWO.
The applied math program you're forced to combine it with a major in applied math and you're also required to take all of the 'tougher' upper year courses (Quantum 3, EM2, Classical Mechanics 2, etc.) Look at the degree requirement.
The Physics program from the Physics department does not require all of the above. The highest you are *REQUIRED* to go is Classical Mech1, EM1, and Quantum 2, as well as other courses as you'll see when you look at the degree requirements.
Also, the Theoretical physics program is a double major, applied math and theoretical physics. The honors Physics program is not, it's an honors specialization which also requires original research in your fourth year (you can do theory! Not just experimental). To satisfy your itch to do theory and also original research you can take the Honors Spec Physics combined with the Minor in Advanced Physics *links below*. This basically makes it a 'theoretical' physics degree due to the higher physics and math courses that you'll have to take. I'm currently enrolled in the Honors + Minor since I didn't really want to cut myself off from the experimental side (i.e. in the applied math route there is no experimental work, in the honors route you have to take a 2nd and 3rd year lab course, giving you experimental experience).
Here are the links to the programs:
http://westerncalendar.uwo.ca/2011/pg721.html"
http://westerncalendar.uwo.ca/2011/pg1471.html"
http://westerncalendar.uwo.ca/2011/pg604.html"
http://westerncalendar.uwo.ca/2011/pg601.html"
I'd also like to note that according to the calendar the major in theoretical physics CANNOT usually be completed in 3 years (after completing your first year reqs).
As for our strength in theoretical physics. At the undergrad level I'd have to say it's mediocre (though I don't know all the details). We do have ties with the Perimeter Institute in Waterloo, off the top of my head I know Dr. Miransky is jointly appointed there, there may be more faculty as well. Another thing I'd like to note is that Dr. Miransky had a strong hand in the theoretical framework behind Graphene which ultimately led to this years Nobel Prize in Physics (there's an article on the physics home page about it).
If you have any more quesions feel free to ask (course related, prof related, what to take, etc...)