In medium saucepan, bring syrup ingredients to a boil; lower heat and stir until sugar dissolves. Cool slightly.
In large bowl, beat meringue powder and 1/4 cup water with electric mixer until stiff peaks form, about 4 minutes. With mixer running, slowly add cooled syrup to meringue mixture; continue beating on high 4 minutes. Stir in coconut extract. If desired, sprinkle iced cupcakes with toasted coconut.