To make the frosting, combine the sugar, egg yolks, and evaporated milk in the top of a double boiler. Stir with a wire whisk until the yolks are fully incorporated. Add the butter. Place over simmering water and bring to a boil. Simmer for 12 to 15 minutes longer, stirring constantly, until the mixture thickens. Add the vanilla, coconut, and nuts. Cool.
To assemble the cake, place one layer on a cake stand and spread with frosting. Frost each layer completely, top and sides, as it is added to the cake.