I have been tearing my hair out for some time as I plague google and various other search engines in search of a really nice customizable, free image gallery.
I'm thinking some kind of Ajax gallery would be the best. It needs to have custom thumbnails (from a design point of view), and also read caption data from an XML file.
I'd like to write my own, though I fear I do not know enough about AJAX or PHP to be able to achieve something that worked well easily.
Having discovered it in this thread, I just installed Smooth Gallery on a site and I really like it.
Regarding your problem, jackgone, do you have an objection to Flash? Because the well regarded SlideShowPro ( http://slideshowpro.net/ ) does what you're after (i.e., customizable thumbnails, fed via XML.) It's not free, but I suspect you can afford the price ($25.)