FYI, we submitted a new (final! really! seriously!) revision of the
license to OSI today with one last tweak to this language, making it:
1.7. "Larger Work"
means a work that combines Covered Software with other material,
in a separate file or files, that is not Covered Software.
Your proposed limitation (to Source Code Form) doesn't work, because
we want to permit combination with non-source modules (binary blobs,
plugins, etc.) So we use the broader Covered Software instead, keeping
in mind that Covered Software is defined to include Modifications,
which are Source Code.
At the same time, we have to make clear that this is not a loophole
that allows circumvention of the definition of "Modification"- the
thing being combined must be distinct, and it must not be Covered
Software. We think separate is a good word for this, particularly in
combination with the specific requirement that the thing being
combined not be Covered Software.
Hope that makes you comfortable; we certainly thank you for pushing us on this.