When I make coconut layer cake, I fold coconut into the buttercream frosting and then stick shredded, unsweetened coconut to the outside of the cake (via the frosting. When I make coconut pound cake, all the coconut is inside the cake.
I like this tutorial for covering a cake with sprinkles: http://thecakeblog.com/2012/09/diy-rainbow-sprinkle-cake.html Perhaps you could try the same thing with the coconut flakes.
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