Cream butter; gradually add 1 cup sugar, beating well. Add egg yolks; beat well. Add flour to creamed mixture alternately with milk, beginning and ending with flour. Pour batter into 2 greased and floured 8-inch round cake pans; set aside.
Beat egg whites (at room temperature) until foamy. Gradually add 3/4 cup sugar, one tablespoon at a time, beating until stiff peaks form Add coconut; stir well. Spread meringue mixture over cake batter, sealing to edge of cake pan. Bake at 325° for 30 to 35 minutes or until meringue is lightly browned. Cool in pans 10 minutes; gently remove layers from pans, and let cool completely.
Place first layer on serving plate, meringue side up. Place second layer on top of first, meringue side down.
Beat whipping cream until foamy; gradually add 1/2 cup sugar, beating until stiff peaks form. Fold in pineapple. Spread whipped cream over top of cake and around lower edge of cake.