[Using CURL and XSLT]

If I understand you correctly you want:

$file = 'generate_xml.php';
ob_start();
include($file);
$xml = ob_get_contents();
ob_end_clean();

You might want to use set_error_handler to make sure the errors are displayed on the screen in not in $xml. You should also not send text/xml header in generate_xml.php by checking if basename($_SERVER['SCRIPT_FILENAME']) == __FILE__;

Hope this helps,
Arnold