Well, in answer to that, I think biscuit here was meant in the BE way, not AE. In BE a biscuit is the equivilent of a cookie. In the US we have a famous cookie maker called NABISCO which stands for NAtional BIScuit COmpany.Well, "take the cake" makes more sense, because the cake is a big affair. But the biscuit? Why would a biscuit be a prize? I checked biscuit and it's (BrE: ) a small baked unleavened cake, typically crisp, flat, and sweet. Maybe it's the last biscuit on the plate?
Maybe I'm being too particular. I do understand the general concept now though, through the "take the cake" version.
He doesn't offer an answer to the question of why we say 'biscuit',*  in this context [/edit] nor have I found any other. If the saying did originate in the US, we would want know why a biscuit would be associated with winning the prize in this country.Take the biscuit could once mean winning or excelling.[....] But these days, it’s an exclamation to suggest that somebody has done something unprincipled that would win them a prize in a contest of unethicalness. An early example that shows how this sense developed was in the Fort Wayne Daily Gazette of Indiana in November 1880. There seemed to be a quarrel going on between the editor of the Gazette and a rival paper: “For pure cussedness, the new and exceedingly fresh young person [at] the Sentinel takes the biscuit.”
Cagey, I found this to be very enlightening. It also seems to clarify how we began to call biscuits cookies by Dutch influence. http://en.wikipedia.org/wiki/BiscuitThe take the biscuit version seems to have been American in origin. At least, that is what Michael Quinion of World Wide Words suggests:He doesn't offer an answer to the question of why we say 'biscuit', nor have I found any other. If the saying did originate in the US, we would want know why a biscuit would be associated with winning the prize in this country.
From the explanations above, and how it feels, I think "take the cake" is used appropriately in the first example, but not in the second.Man, when it comes to being a fool, you take the cake!
This girl takes the cake when it comes to beautiful blue eyes.
To win the (imagined) prize, or contest for said deed, ocassion, or quality.