If they are willing to cut the cord now, if they put you on probation, what will happen is that you will end up get nonrenewed or terminated at the end. You won't be able to remediate to the point of saving this position. Any frankly, do you want to be in an environment where you will be under the microscope 24/7? Even if something goes wrong and it was out of your control, you'll likely be blamed. This would be a very toxic place for you in that situation. In the end you won't get a very good letter from your PD. It's better to accept it, take the best letter you can get and whatever support possible.
Now if you were a PGY4, I would say do what you can to get one more year, but as a PGY1, it's better to cut your losses now.
Have you talked with the intern from last year yet?