Melt butter in large skillet on medium heat. Add apples; cook 5 min. or until crisp-tender, stirring frequently. Remove from heat.
Place caramels in microwaveable bowl. Add 2 Tbsp. evaporated milk; set aside. Pour remaining evaporated milk into large bowl. Add sweetened condensed milk, eggs, vanilla and cinnamon; whisk until blended. Add bread; stir until liquid is absorbed. Stir in apples and cranberries; pour into buttered 2-qt. baking dish. Place in water bath.
Bake 1 hour 10 min. on or until knife inserted in center of pudding comes out clean.
Microwave caramels in microwaveable bowl on HIGH 1 min. or until completely melted, stirring every 30 sec. Drizzle over pudding. Serve topped with COOL WHIP.