Prepare cake batter and bake as directed on package for 2 (9-inch) round layers, stirring 2/3 cup coconut, 1/4 cup milk and dry coconut pudding mix into batter before pouring into prepared pans. Cool cakes in pans 10 min. Remove from pans to wire racks; cool completely.
Meanwhile, beat dry vanilla pudding mix, sugar and remaining milk in large bowl with whisk 2 min. (Pudding will be thick.) Stir in COOL WHIP. Refrigerate until ready to assemble cake.
Stack cake layers on plate, filling with layers of 1 cup of the pudding mixture and 3/4 cup of the remaining coconut. Frost top and side of cake with remaining pudding mixture. Press remaining coconut into pudding mixture. Refrigerate 1 hour