Your arguement is moot because the two systems have totally different characteristics and totally different jobs. RPG-7 is first and foremost a direct-fire anti-armour weapon. Yeah there are some little-used alternative warheads out there and yeah it can do some other things with varying degrees of competence but it is primarily an anti-armour weapon. M-203 is a direct (at short range) or indirect general fire support weapon for infantry. It can do a lot of things RPG-7 can't do, like fire at enemy troops in defilade or drop smoke - both of which the infantry squad/section might find quite handy.

But thought it may be interesting to see which party facing each other was likely to have the advantage.

A closer comparison to the M203 would be a 60mm mortar. The M203 is far handier and lighter than the 60mm, and with a bit of training you can lob HE grenades into windows 300m away. Similarily, a Western comparison to the RPG-7 series would be the 84mm Carl Gustav Recoiless Rifle series or the Israeli B-300 series, used in the US as the SMAW: http://www.israeli-weapons.com/weapons/missile_systems/anti-armor/b-300/B-300.html The Carl Gustav is now a bit long in the tooth - its considered a bit too heavy these days, although it may still be able to take on modern heavy armour with recently developed rounds. The B-300 is Israel's answer to the RPG-7 (which the IDF issued to infantry units, with Israeli manufactured warheads), and has been used successfully by USMC and SF units in Afganistan and Iraq.

Isn't the B300 also known as the SMAW in USMC service? I rarely see this weapon in my pics. I heard that SMAW also features thermobaric (fuel air) warheads. Does the AT4 (M136) use the same 84mm warhead, 400mm penetration as Carl Gustav? Sme books say the AT4 is simply a disposable version of Carl Gustav.

The USMC SMAW does have a thermobaric warhead and it was used a couple of times in Iraq with mixed results. The warhead works best when it detonates in a sealed building. The typical building in Iraq has no windows - they either never had them or they have been destroyed or stolen. In my experience, the SMAW is not widely liked, it is difficult to keep boresighted with its .50cal spotter rifle and it is heavy and bulky. It does provide a nice bang when it hits.

The SMAW is not well liked- so that's why the AT4 (M136) is more popular, yah?

Which is stronger the RPG7 or the Grenade launcher M203?

Just as the Bazooka was a popular foxhole blaster for the US army in WW2, it seems as though the terrorists and the Russian sphere of influence armies still find that kind of utility in using the RPG for infantry fighting.

There are some newer RPG rounds that are designed to defeat reactive armour.

Maybe it is easier to be accurate with direct fire from an RPG rather than indirect fire for terrs using grenade launchers?

As seen from the Israeli forum, terrorists like hamas and hizbollah in particular no longer prefer infantry assaults for defence but rather horde tons of guided anti tank missiles which they use to defend themselves against the Israeli infantry.  There is some method to their madness. Though expensive, the  guided ATGM rd  provides direct fire arty support that is guided, and when your troops don't stand a chance in man to man.

Mr. Picky thinks that indirect fire is for shooting at things that you can't see, rather than using a higher than usual trajectory to hit something that you can. As such I would class a 40mm grenade launcher as direct fire rather than indirect.