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.