Prepare: Cake batter as directed on package; stir in 2/3 cup of the coconut, Pour evenly into 2 (9inch) round cake pans. Bake as directed on package. Cool 10 min. Remove cake from pans to wire rack. Cool Completely.
Pour: Milk into medium bowl. Add dry pudding mix and sugar, beat with wire whisk for 2 min. or until well blended; mixture will be thick. Gently stir in whipped topping. Refrigerate for 15 min.
Place: 1 of the cake layers on severing 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 sides with remaining coconut into pudding mixture. Refrigerate at least 1 hour. Store leftover cake in refrigerator.