Spread coconut on a large baking sheet. Toast, stirring occasionally, until light brown, 8 to 10 minutes.
Let cool. Put 4 dessert bowls in refrigerator to chill.
Peel oranges and grapefruit, removing white pith. Working over a bowl to catch juices, cut segments from membrane. Put fruit in same bowl. (For instructions to slice perfect citrus segments, see Tip Strip, left.)
Just before serving, stir cooled coconut, grapes, sugar (adjust amount to taste) and marshmallows into bowl with oranges and grapefruits. Stir gently to avoid breaking up citrus segments.
Spoon ambrosia into chilled bowls and top each with a cherry.
Serve ambrosia with butter cookies or slices of pound cake, if desired.
