The color-picker doesn't work in Experience Fragment (XF) pages since the Handlebar js is not available there and underscore (clientlibs added as dependency in the picker) doesn't have Handlebar.compile module. I was trying with handlebars as dependency all the time after reading it somewhere, but after some debugging ( thanks to my co-worker) I could figure out that the dependency which had handlebar in AEM is cq.handlebars.
So anybody facing Handlebars.compile is not a function issue in the future, please add cq.handlebars as additional dependency to your clientlibs
Thanks
Veena