The colour buffer method is *slightly* better, however it's an extremely slow approach compared to rolling your own ray picking algorithms (people always forget that rasterising a tonne of triangles is actually very slow).
Can be true, but it depends on the situation. If you have a game running at decent FPS, say 40, then doing a color selection would take at most 1/40=25 ms. if you do the selection as a result from the player clicking, then it is no problem at all. The player will never notice the 25ms delay. Not only that, you maybe only need to draw the clickable objects and can skip everything else (depends on how the scene looks). Even better, the fragment shader for color selection is usually much simpler, it only draws a color (no need for lights and other effects).
But there are cases where it matters. If you want to continuously track where the pointer is, maybe highlighting the object behind the mouse pointer in every frame, then you would need to do the color picking much more frequently (maybe 30 times per second). If so, it can turn out costly and reduce the FPS significantly.
Ray tracing can be very easy and very hard, depending on the situation. If you only have a few monsters, and you want to find which one, then a simple bounding box can suffice. But there are more complicated use cases, where there are maybe millions of possible hits that have to be tested. That would require the use of an Octree,and other techniques.
So there is no single answer to this.
