PREPARE cake batter as directed on package; stir in 2/3 cup of the coconut. Pour evenly into two 9-inch round baking pans. Bake as directed on package. Cool in pans 10 min; remove to wire racks. Cool cakes completely.
POUR milk into medium bowl. Add dry pudding mix and sugar. Beat with wire whisk 2 min. or until well blended. (Mixture will be thick.) Gently stir in whipped topping. Refrigerate 15 min.
PLACE one cake layer on serving plate; spread top with 1 cup of the pudding mixture. Sprinkle with 3/4 cup of the remaining coconut; cover with second cake layer. Spread top and side with remaining pudding mixture; press remaining coconut into pudding mixture. Refrigerate at least 1 hour. Store leftovers in refrigerator.