I've made several beers with coconut.
When I add coconut, I'm generally adding fruit additions as well (pinapple complements coconut REALLY well), so I alway put the coconut in secondary, but there wouldn't be any real drawbacks to putting it in primary.
I use flaked coconut from the asian market, but they have something comparable at the grocery store, probably in the baking section. I just use one 14 oz bag a 5 gallon batch for 3-4 weeks and get a nice subtle but noticable coconut flavor. The packaged coconut is already pastuerized (steamed) prior to packaging, so you can toss it right into the fermenter without sanatizing. If you plan on using fresh coconut straight from the coconut, you would need to sanatize.
Note that the flaked coconut floats, so it gets REALLY messy when it comes time to rack the beer. You just have to be extra carful when racking.
Hope that helps! Good luck!