Yes, they do eat it. It's soft and tastes better than royal.
Keeps the cookies softer/moister, too.
As for cakes, if applied thinly and over a good coating of buttercream, many will eat the fondant if it's a good quality product like Satin Ice, FondX, Massa, Choco Pan, etc.
I advise anyone not familiar with fondant on cakes to eat the cake and icing out from under it and to then eat the fondant as though it's a piece of tootsie roll or other chewy candy. This works very well and I see the fondant get consumed pretty regularly.