1Heat oven to 350°F (325°F for dark or nonstick pans). Grease bottoms and sides of two 8- or 9-inch round cake pans (do not use cooking spray); lightly flour. In large bowl, beat cake ingredients with electric mixer on low speed 30 seconds, then on medium speed 2 minutes. Divide batter between pans.
2Bake 8-inch rounds 32 to 37 minutes, 9-inch rounds 28 to 33 minutes, or until toothpick inserted in center comes out clean. Cool 10 minutes. Run knife around sides of pans to loosen cakes; remove from pans to cooling racks. Cool completely, about 1 hour.
3In 2-cup microwavable bowl or measuring cup, stir 1 box gelatin into 1/4 cup water. Microwave uncovered on High about 1 minute 30 seconds or until mixture boils, stirring 2 to 3 times to dissolve gelatin. In large bowl, beat gelatin mixture, powdered sugar, butter, lemon juice and 2 teaspoons water on low speed until frosting is thick but spreadable. (Add additional 1 teaspoon water if needed to make frosting spreadable.)
4On serving plate, place 1 cake, rounded side down. Spread with 1/2 cup frosting. Drop 2 drops red food color and 1 drop yellow food color on frosting on cake; swirl with spatula to create deep orange. Top with second cake, rounded side up. Reserve 1/2 cup frosting. Frost side and top of cake with remaining frosting. Add 1 or 2 drops red and yellow food colors to reserved frosting. Swirl around cake. Sprinkle with granulated sugar. Decorate with peach candies. Cut cake gently with serrated knife. Store loosely covered.