I think I might be worried about waterlogging the trees, but since you are having trouble retaining water, this might be a good idea.
Another thing I am perhaps concerned about with using woodchips is the possibility of the woodchips retaining moisture too well and not giving any back to the tree until the woodchips decompose.
I'm thinking something like a pit filled with a mix of organic matter, dried leaves, cut grass, kind of like
compost, mixed a bit with rocks or sand might do. Though, this makes me a bit worried about the possibility of gleying. Though, gleying be a benefit, because retaining water is currently an issue.