The rising demand for sustainable alternative proteins has driven the exploration of agro-industrial byproducts as functional food ingredients. Virgin coconut oil (VCO) wet processing generates protein- and fiber-rich residues that remain largely underutilized. This study optimized the formulation for producing hybrid textured vegetable protein (hTVP) from VCO byproducts for plant-based sausage applications using cold extrusion. Using Design-Expert®, a combined experimental design evaluated the effects of the soy protein isolate to coconut dietary fiber ratio (SPI:CDF, 70:30–90:10) and moisture content (60–70%) across 14 experimental runs. The functional properties of the resulting hTVP (i.e., bulk density, oil/water holding capacities, and rehydration capacity) and the sensory acceptability (9-point Hedonic rating) of the formulated plant-based sausages were modeled using multiple linear regression and response surface methodology. Significant models (p < 0.05) were established for hTVP oil holding capacity (2.47–3.08 g oil/g sample), and mouthfeel acceptability (5.43–6.93) and overall acceptability (6.14–7.21) of the plant-based sausages, indicating that the SPI:CDF ratio and moisture content strongly influence both ingredient functionality and product quality. However, experimental validation is still required to confirm the optimal conditions. This study demonstrates a viable method to upcycle VCO processing waste into functional ingredients, offering a more sustainable, resource-efficient raw material option for the rapidly growing plant-based meat industry.