You can certainly use a PHP file (instead of a static XML file) to dynamically generate a Juicebox gallery's XML file on-the-fly at the time the gallery is displayed/viewed.
An example of how this can be achieved can be found in the answer to Query #3 in this forum post.
Essentially, you would use a PHP file instead of a traditional static XML file and point your Juicebox gallery towards it using the configUrl configuration option.
Your PHP file would need to generate the XML code using the same structure as a standard 'config.xml' file (see the 'juicebox_lite_1.3.2/web/config.xml' file from the Juicebox-Lite download zip package for an example) but you could pull in images and captions from your chosen source by modifying the code as required.

The web page containing the gallery will contain the gallery's embedding code (as found here).
You would use a configUrl within the embedding code to point towards your PHP file so that Juicebox can find it, e.g.:

<!--START JUICEBOX EMBED-->
<script src="jbcore/juicebox.js"></script>
<script>
new juicebox({
configUrl: 'path_to_php_file/config.php',
containerId: "juicebox-container",
galleryWidth: "100%",
galleryHeight: "100%",
backgroundColor: "#222222"
});
</script>
<div id="juicebox-container"></div>
<!--END JUICEBOX EMBED-->

The XML file is where the list of images and captions is stored. Therefore, each gallery needs its own XML file (otherwise all galleries would display the same images and captions).
However, you could use the same PHP file to generate the XML data for different galleries by adding query string parameters to your configUrl to differentiate between galleries and so that the PHP file knows which gallery's information to gather, e.g.:

configUrl: 'path_to_php_file/config.php?id=12',

In the example above, you would get the 'id' within the PHP file (using $_GET['id']) and the PHP file would conditionally gather information from your chosen source depending on this value.

This would be a good idea. The principle is the same for Juicebox-Lite as it is for Juicebox-Pro so download Juicebox-Lite and try it out for yourself.

A gallery's files are usually all stored in the same directory for ease of use. Your gallery's files do not all need to be in the same directory but if you move them, then you may need to point towards them using configuration options such as configUrl, baseUrl and themeUrl. A list of these Embed Options can be found here.

The images and thumbnails for the gallery can be anywhere on your web server and they are pointed to via the imageURL and thumbURL entries in the XML file (which would need to be determined by your PHP file).

This FAQ (and the links within it) may also help:
Can Juicebox handle a custom data source, for example RSS or Instagram?

Please see this FAQ:
When I view my gallery locally in Google Chrome, I see the message "Juicebox does not display locally in Google Chrome". Why?

You will need to create a completely separate PHP file to generate the XML data for your gallery. This will have nothing to do with your other PHP file which creates your main HTML page and which will include your gallery's embedding code.

The PHP file which generates the XML data will be processed by the server and will output only the XML data required for the gallery. It is this file that you will need to point to within your gallery's embedding code with a configUrl (otherwise, Juicebox will not know where to find the PHP file).

In all my posts above, I have recommended using a separate PHP file to generate the XML data (so that the code can be accessed and reused from different pages) using the following process:

Your 'original' PHP file would create your main web page including your gallery's embedding code. Within the embedding code you would point towards a different PHP file (using the configUrl configuration option) which would generate the XML data. Once processed by the server, the data output by this PHP file would look just like an XML file to a browser.
The PHP file which would generate the XML data would look something like the file in this forum post.

However, as you suggested, an alternative would be to use a session variable using the following process:

Have the XML data generated in your 'original' PHP file and save the data as a long string in a session variable.
Point towards a different PHP file (using the configUrl configuration option).
In this PHP file, you would simply output the contents of the session variable. The entire PHP file would look something like this:

<?php
header('Content-type: application/xml');
session_start();
echo $_SESSION['xmldata'];
?>

Both methods will work fine but you do need to have your XML data in a separate file (whether it is generated by the file itself or simply passed to the file in a session variable).
It would not be possible to generate the XML code in your 'original' PHP file (which generates the page containing the gallery's embedding code) and pass it directly to the gallery.