It's an interesting question. Having worked for organisations that fire fast, and those that don't, in general I tend to see it as a positive cultural indicator [1] - albeit one that needs some digging to verify - but I can understand that it might unsettle some applicants.
In fact nowadays I favour it strongly enough that next time I'm the one going through the interview process I'll probably investigate. I may even ask outright although, again, "What does somebody have to do to get fired around here?" is a question open to some misinterpretation.
[1] Working with difficult or unproductive people for long periods can be hugely draining on a team, not to mention hugely damaging commercially. Left unchecked it can even destroy your business.
For people who already have full-time jobs it seems like a much worse deal, though. I certainly wouldn't take it, at least - it makes very little sense to give up the certainty of my current job in exchange for being maybe unemployed in a month.
Most internships are for hiring, not the labour the company gets from them. They function as three month long interviews but unlike a short term contract leading to hire it’s expected that they won’t immediately convert into a job as students return to university for another year. They’re also far more opaque to other employers on a cv. If someone did internships at three different companies over their degree they could have wanted to see many different companies or they could have performed below expectations at all three places. If you see their cv you won’t know.
I suppose it diverges more if you consider internships prior to the final one due to the weird optionality on following intern seasons, but I think that's a minority of internships due to the hiring goal (once you start looking at 2+ year lead-times before a potential full-time start date it becomes much harder to justify).
People in places where they fire easily and often are too insecure. That means taboos over things that should be discussion and fear of disagreement.
So, we as an industry default to "no" instead of "yes."
If an organization was good at firing fast, would people be willing to take a job there? Would you be able to truly assess an engineer within a month in a way you wouldn't in an hour?
The first two weeks are usually a wash. But you might be able to get more signal in that second two weeks?
Does that same equation hold true if it's contract to hire? Would you take such a job?