I have coconut bedding in the majority of my frog enclosures without any problem. I used to keep paper towels in some of my treefrog cages, but it wouldn't take to long for them to get disgusting. The white paper towels would often turn yellow and sometimes have purple or red patches. That can't be good!

If you want to avoid the coconut from being dragged all over the place, try placing leaf litter on top of it. Some of my enclosures have leaf litter in them and has worked out great thus far. You can get some Josh's Frogs http://www.joshsfrogs.com/category/66/Leaf-Litter. I use the oak leaves he sells. I also use some Indian almond leaves that I bought from Black Jungle for subtrate, but mostly I use these leaves for "tadpole tea"

I have tried oak leaves from the yard in a cage of native salamanders, but it rotted too quickly. Leaves I had thrown in there last November are almost completely gone now. The oak leaves that Josh sells are supposed to last much longer.