Preheat oven at 350 degrees F. Line a 9-inch cake pan with waxed paper and spray with nonstick oil.
Sift together flour, sugar, baking powder and salt into a mixing bowl. Make a well in the center for dry ingredients. Add water, oil, zest, grapefruit juice and egg yolks. Beat until smooth. Beat egg whites and cream of tartar separately until whites are stiff but not dry. Gradually fold egg whites into flour mixture with a rubber spatula until just blended. Do not stir the mixture.
Pour batter into prepared cake pan.
Bake for 25 minutes or until cake springs back when gently touched with a finger. Invert pan on cake rack to cool. Run spatula around edge of cake. Carefully remove from pan. With a serrated knife, gently cut layer in half.
Let cream cheese soften to room temperature. Beat cheese until fluffy. Add grapefruit juice and zest. Gradually blend in sugar. Mix until well blended. Add food coloring. Crush several grapefruit sections to measure 2 teaspoons.
Blend into frosting. Spread frosting on bottom half of cake. Top with several grapefruit sections. Cover with second layer of cake. Frost top and sides. Garnish with remaining grapefruit sections.