Stacey17, I think the gelatin does gel slightly but because it is dispersed throughout the other ingredients (you add it as a dry powder, not made up in hot water), there is not distinct jelly form in the cake. Does that make any sense? I don't know if I explained that properly. The jelly molecules are too far apart to make a jelly, they just attach to the other liquid in the cake but are too small (to be noticeable).
I made a butterfly cake for my son's 3rd bday with the SkyCo Duncan Hines strawberry mix. I suck at cakes, so I'm glad he liked it. As long as it has colorful sweets on top, he is happy!
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