1. Preheat oven to 350 degrees F (175 degrees C).
2. Place 1 cup of the sugar in a small nonstick saucepan and heat the sugar over medium heat. Cook gently, without stirring, but shaking occasionally until the sugar is dissolved. Lift the pan over the heat source (4 to 6 inches) and continue to cook the sugar until it has completely melted and turns a golden brown. You may slightly stir while cooking, but continually stirring causes the sugar to crystallize.
Pour caramelized sugar into a glass 1 1/2 quart baking dish, and swirl to spread the caramel over the bottom of the dish evenly, then set aside to cool for 15 minutes before proceeding.
3. Once the caramel has hardened, pour the sweetened condensed milk, cream, milk, eggs, vanilla, 1/2 cup sugar, and coconut into a blender. Blend for 3 minutes until smooth. Pour into the baking dish over the caramel.
4. Place the filled casserole dish into a larger pan and add 1 inch of HOT water to the outer pan. Bake in preheated oven for 50 to 60 minutes, or until set. When done, remove from oven and let cool for 30 minutes. Run a knife around the edges of the dish to separate the flan from the sides. Refrigerate overnight.