BYO recently had a write up about adding coconut to beer. There were two ways they recommended adding coconut, at flameout and in secondary. They recommend roasting the coconut at (I forget the temp) until it's lightly browned. Sanitize in vodka if adding to secondary. The couple of clone recipes they had using anywhere from 2.5 oz to 2 lbs for a five gallon batch, I believe.
I'm interested in doing a beer with coconut and think I'll use closer to the 2 lbs. Death By Coconut by Oskar Blues and Bolo by Burial are very coconutty and fantastic brews and would guess they add a lot per gallon.
I just grabbed 2 12oz bags of unsweetened coconut that I plan on toasting and using. The store I went to actually had bags of toasted shredded coconut but I figured I'd rather do it myself.