this becomes the probability for a particular velocity v, and not for all particles with a set kinetic energy.
Why is this?
No, I think you are misunderstanding the initial formulation of the Maxwell-Boltzmann distribution. Your first version with $P \propto e^{-E/kT}$ is a probability as a function of variable kinetic energy, $E$, for each particle and a single, scalar temperature, $T$, for the entire distribution.
The second version with $P \propto e^{-m \ v^{2}/2kT}$ is a probability as a function of variable velocity, v, for each particle and a single, scalar temperature, $T$, for the entire distribution.
Thus, in both cases one has $P$ as a function of some variable that is specific to each particle (i.e., $E$ or v) and a scalar (i.e., $T$) that is related to the full width at half max (FWHM) of the distribution.
Side Notes:
- Be careful not to confuse the velocity distribution with the speed distribution, as they have slightly different coefficients.
- Technically the conversion from kinetic energy should be done with momentum, not velocities but in the nonrelativistic limit this is a trivial issue.