I don't think so, to me an internship is temporary by nature and does not have a "guaranteed" job at the end based on good performance.
>you would have a major adverse selection problem where the better candidates would never pick a “probationary” job with second-class status over a normal job
The selection process is so competitive right now that I think plenty of people would be happy for such a change if it meant a more reasonable interview process. Plenty of strong candidates are being thrown away over arbitrary metrics right now anyway.
Personally I'd take a non-leetcode non-white board interview with a probationary period over the typical grueling 2-5 round FAANG process, and I'm sure I'm not the only competent developer who expects to have trouble with the typical FAANG process.